Publication: India : Role of Self-Regulatory Organizations in Securities Market Regulation
Date
2007-06
ISSN
Published
2007-06
Author(s)
World Bank
Abstract
This Note identifies four main
theoretical options for securities markets self-regulation
in India, based on precedents from international markets.
There is no single 'right' approach - the note
outlines three options that employ Self Regulatory
Organizations (SROs), which could be viable solutions for
Indian capital markets. These are: (1) Restructure the
existing Exchange SRO system to create a joint SRO
subsidiary of the National Stock Exchange (NSE) and the
Bombay Stock Exchange (BSE). The new entity would be
responsible for both market and member regulation. The
Exchanges provide an existing platform for SRO functions
that works reasonably well. This platform includes a
governance structure, professional management, experienced
staff, documented programs and procedures, and IT tools. But
this option raises all of the issues on conflicts of
interest at Exchange SROs. (2) Hybrid structure: NSE and BSE
retain responsibility for market regulation, and create a
new independent SRO for member regulation. This option is
very similar to Association of National Stock Exchange
Members of India's (ANMI's) proposal to create a
member-based SRO (but the SRO should not be based on a trade
association because of the significant conflicts of
interest). It is based on the idea that supervising members
is best done by a central regulator, but that regulating its
own market is essential to an Exchange's market quality
and brand. (3) New central independent SRO for both market
and member regulation. A single independent SRO is
theoretically the cleanest and efficient solution. But it is
difficult to develop and in fact is only now in the process
of being implemented in the USA and Canada.
Citation
“World Bank. 2007. India : Role of Self-Regulatory Organizations in Securities Market Regulation. © Washington, DC. http://openknowledge.worldbank.org/entities/publication/c4c76a5a-1631-5bf1-a23e-bdcf7cc22747 License: CC BY 3.0 IGO.”