By IE&M Research
SEBI Board has recently laid out the broad regulatory agenda for the capital markets for the financial year 2017-18. It has proposed to review the Securities Contracts Regulation (Stock Exchanges & Clearing Corporations) 2012 and the SEBI (Depositories and Participants) Regulations, 1996 to reflect the shifts that have taken place over the last few years in the capital markets. SEBI will put up the proposed changes for public comments before taking them up. SEBI also plans to give a boost to research and investor education. The three key points are as follows:
Simplifying the KYC process
This will go a long way in nurturing the “Ease of Doing Business” in the capital markets. Under the proposed plan, Foreign Portfolio Investors (FPIs) will be able to use a common application form for registration, opening of bank account, opening of demat account and application for Income Tax PAN. SEBI also proposes to set up an online facility wherein financial intermediaries can register themselves online without physical intervention. At present there are multiple layers of KYC that needs to be done for different businesses. SEBI also proposes a centralized KYC which will cover trading in equities, derivatives, commodities and forex so that the hassles of multiple registrations can be avoided.
Reducing the listing time
Already with the rapid strides in technology, SEBI has successfully compressed the listing period between closure of an IPO/NFO and its actual listing to just 6 days, now SEBI sees the potential to compress this listing gap further to 3-4 days to begin with. The seamless integration between banking, trading and dematerialization should make it possible to compress it further. This will assist in shorter lock-in periods for investor’s funds.
Listing of securitized receivables
To give a big boost for the banks and ARCs SEBI proposes to allow the listing and trading of securitized receivables of Asset Reconstruction Companies. Securitization is the process by which future cash flows are securitized into a receivable and sold as a security to investors. Asset reconstruction companies (ARCs) typically take over the doubtful loans of a bank at a discount. In the interim, they can use the securitization route to finance the future receivables.
Institutional participation in commodity market
Towards making the commodity markets attractive for institutional investors, SEBI has proposed to bring about closer integration between commodity spot and futures market as well as strengthen risk management and surveillance of commodity brokers. This move will offer institutional investors like FIIs, banks and mutual funds an additional asset class to invest in. The integration of spot and futures market will trigger the development of the spot-futures arbitrage for institutional.