“The legal regime governing forward and option contracts in securities of Indian companies is archaic and needs immediate revamping for a healthy financial sector,” Assocham said
Industry body Assocham asked the government to revamp provisions of forward and option contracts in securities to boost the financial sector of the country.
“The legal regime governing forward and option contracts in securities of Indian companies is archaic and needs immediate revamping for a healthy financial sector,” it said. It asked to allow genuine non-speculative contracts like forwards, buybacks, right of first refusal and pre-emptive rights in commercial agreements.
“...speculation is not considered bad anymore as it not only provides liquidity and price discovery in the market but often offers trades on the other side of hedgers,” it argued. It said that most trades in secondary market ‘particularly exchange-traded futures’ can be categorised as speculative.
The chamber said that shareholder contracts are speculative in nature as they are based on commercial underlying and consideration, allocating real world rights.
“Prohibiting such non-speculative contracts is unintended and literally renders millions of investment agreements, private equity deals, joint venture agreements and other commercial contracts partially illegal,” it added.
SEBI’s new offices will be located at Chandigarh, Jaipur, Indore, Patna or Bhubaneshwar and Bangalore or Kochi
With an aim to take its services at the door-step of investors, the Securities and Exchange Board of India (SEBI) has decided to open five more local offices, including at Chandigarh and Jaipur, in the current fiscal.
As part of its decentralisation of work to regional offices, the Mumbai-headquartered SEBI is opening new local offices in different regions of the country.
The five new offices will be opened at Chandigarh, Raipur, Indore, Patna or Bhubaneswar and Bangalore or Kochi in 2012-13, according to an official document.
These offices have been "identified inter-alia" on the basis of number of demat accounts, registered folios, exchange trading terminals and rate of growth in beneficiary accounts. The idea behind new offices is to deepen of securities market.
The market regulator had decided to open a new Western Regional Office-I at Mumbai and three local offices at Hyderabad, Gujarat and Luck now in 2011-12. It has identified office buildings and "further work is in progress", it said.
The SEBI board in March 2011 had asked the regulator to explore scope of strengthening its regional offices. Following the board decision, a series of internal discussions took place to explore the possibility of decentralisation of work to regional offices and opening of offices at new places.During the discussions, it emerged that the investor should get the services of SEBI at his door step to promote a balanced, pan-Indian securities market. As per the regulator, physical proximity of SEBI office to investors and intermediaries would promote deepening and broadening of the securities market.
Currently, India has about two crore demat accounts, which are mandatory for investors to trade in the market
With the number of new investor accounts falling by nearly half in the last fiscal and the trade volumes nearing a plateau, SEBI (the Securities and Exchange Board of India) is mulling various steps to deepen the Indian stock market this year.
The measures are being undertaken to launch new products in the derivatives segment, already the mainstay of the market in terms of volumes, and introduce no-frills trading accounts to attract new investors to cash market as well.
While the cash segment of the stock market involves sale and purchase of shares of listed companies, the derivatives trade provides for trade in contracts whose price is derived from change in the value of one or more underlying assets. In the Indian capital market, derivative contracts are available with underlying assets like individual stocks, stock indices, currencies, and interest rates, among others. However, trade volumes have been relatively sluggish in most of the non-stock derivatives and the steps would be taken this year to boost these segments, a senior official said.
For the cash market, SEBI expects the newly proposed tax-saving equity scheme to provide a boost and could soon introduce a no-frills trading account for the benefit of new investors interested only in basic trading activities. During the just-ended financial year 2011-12, a total of about 9.5 lakh new investor accounts were opened in the country, which is almost half of about 19 lakh new accounts opened during the previous fiscal, 2010-11.
Currently, India has about two crore demat accounts, which are mandatory for investors to trade in the market. Among other steps, SEBI would look at employing latest technology and developing a team of officers with key skills in derivatives during the current fiscal.
The proposed initiatives for 2012-13 include introduction of different derivative products suitable for Indian markets, as well as work towards broadening the participation in the securities markets.
With a view to introduce new products, especially in the derivatives segment, SEBI is also reviewing the current risk management framework for exchanges, including increasing efficiency of settlement process and margining system. SEBI would also put in place the risk management and risk containment measures for derivatives on volatility, and introduce new derivatives for hedging interest rate risk. While it has already issued circulars on two-year and five-year cash settled interest rate futures, a framework for cash settling interest rate futures on 10-year GoI (Government of India) security would be laid down in consultation with the RBI.
Besides, it plans to introduce the concept of clearing members in the cash segment as well. At present, only the derivatives segment has got clearing members, who can execute trades for themselves as well as for their clients.