MUMBAI: The Securities and Exchange Board of India today proposed to create a liberalised framework for entry of new market infrastructure intermediaries that has the potential to threaten National Stock Exchange’s dominance.
“The Indian securities market has witnessed dominance in trading and depository space, raising concerns on the possibility of excessive concentration and institutional tardiness in quickly responding to the changing market dynamics, which may have an adverse bearing on efficiency in trading, supervision and risk management practices,” the regulator said in a press statement.
Another dominant trend shaping the exchange and depository landscape is the emergence of new technologies such as distributed ledger technology, artificial intelligence, machine learning etc, the regulator said.
Sebi’s move comes in the backdrop of multiple technological failures encountered by the NSE and both the Central Depository Services Ltd and National Securities Depository Ltd over the past few years and concerns over dominant market shares of these companies.
“A need is, therefore, being felt to forge a competitive landscape in MIIs’ space by facilitating new players, who may like to challenge other MIIs in their already established domain,” the regulator said.
NSE currently controls more than 95% of the equity derivatives trading volume in India, while it also holds a dominant position in cash segment trading in the stock market. Similarly, NSDL and CDSL run a duopoly in terms of providing depository services in the country.
Sebi has proposed to allow a higher ownership in market infrastructure intermediaries at the initial stage with a gradual reduction in shareholding over a period of time.
An Indian promoter can hold up to 100 per cent stake in a market intermediary and reduce the stake to 51 per cent or 26 per cent in next 10 years. A foreign promoter can start a market infrastructure intermediary with 49 per cent initial stake, which can be brought down to either 26 per cent or 15 per cent in 10 years.