SEBI Proposes New Rules For BSE, NSE And Depositories; What Could Change For Stock Exchanges?

The Securities and Exchange Board of India (SEBI) has proposed easing investment rules for stock exchanges and depositories, potentially giving market infrastructure institutions greater flexibility to invest in businesses linked to their core operations.

SEBI proposed the changes on Thursday, October 22. Under the proposed framework, stock exchanges and depositories would not need to seek the regulator’s prior approval for every investment in related businesses, including certain investments linked to their core market functions.

The development is relevant for major market institutions including BSE, NSE and depositories as it could make it easier for them to pursue investments in related businesses. The proposal, however, is not a final rule and does not involve the approval of any specific investment by BSE, NSE or a depository.

The development comes ahead of the Indian stock market opening on Friday, October 23.

SEBI Proposes Easier Investment Rules For Stock Exchanges And Depositories

At present, stock exchanges and depositories are required to seek SEBI approval for certain investments. The regulator has now proposed relaxing the requirement for specified categories.

Under the proposed framework, exchanges and depositories could make investments linked to their core market functions without seeking SEBI’s prior approval for each transaction.

The relaxation would also cover investments in initiatives mandated by SEBI.

Prior approval may also not be required for certain investments made through subsidiaries using internally generated funds and investments in entities regulated by other financial-sector regulators.

The proposed changes are aimed at making the approval framework more closely aligned with the nature and risk of an investment instead of subjecting different categories of investments to the same approval process.

The relaxation would not remove oversight. Such investments would continue to be subject to the boards of the respective institutions and applicable financial safeguards.

What SEBI’s Proposal Could Mean For BSE And NSE

For stock exchanges, the proposed change could provide greater flexibility while considering investments in businesses connected with their existing market operations.

Removing the requirement to seek SEBI’s prior approval for every eligible investment could reduce an additional regulatory step and allow exchanges and depositories to take investment decisions more efficiently.

It could also give these institutions more room to expand into related businesses and diversify their sources of revenue, subject to their boards and other regulatory safeguards.

For BSE and NSE, this could mean greater flexibility while evaluating eligible investments linked to their core businesses if the proposal is eventually implemented.

The proposal should not, however, be read as an indication that either BSE or NSE is currently planning a particular acquisition or investment. SEBI has proposed a broader change to the investment framework applicable to stock exchanges and depositories.

The market will now watch for the final framework and any subsequent investment or expansion announcements by exchanges and depositories under the revised rules.

The proposal is currently at the consultation stage. SEBI has sought feedback from stakeholders before finalising the changes.

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