Sebi allows banks, insurers to invest in arms of IFSC-based exchanges

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India’s market regulator has allowed banks, insurers, commodity bourses and public financial institutions (FIs) to invest in subsidiaries of stock exchanges and clearing corporations at international financial services centres (IFSCs) such as the one at Gandhinagar in Gujarat.

Late on Thursday, the Securities and Exchange Board of India (Sebi) said any domestic or foreign bourse can form a subsidiary to provide stock exchange services in an IFSC, provided it holds at least a 51% stake in such a unit.

The remaining stake can be held by any other stock exchange, depository, bank, insurer, commodity derivatives exchange or a public FI.

No such entity can hold more than a 15% stake on its own.

The market regulator also framed similar rules for subsidiaries of clearing corporations wanting to launch services at IFSC.

For depositories, the rules for setting up subsidiaries at IFSC will be a bit easier as they need not hold a majority ownership. Up to a 49% stake in an IFSC-based depository can be held by any domestic or foreign depository, stock exchange or clearing corporation, as per the Sebi rules.

Also, any market intermediary (except trading or clearing member) may offer its financial services in an IFSC without forming a separate company if the intermediary is already registered with Sebi and takes the regulator’s approval before starting operations.

After announcing the primary rules in 2015, Sebi has been steadily making efforts to promote the concept of IFSCs in India. In January, the market regulator had allowed registered foreign investors to freely trade on India’s IFSC-based exchanges without applying for a fresh registration to do so.

Sebi had said that if any eligible foreign investor is not registered as a foreign portfolio investors with the regulator, but wants to operate in an IFSC, such an entity can do so by opening an account with a bank and accepting the due diligence carried out by the bank.

In January Asia’s oldest bourse, BSE, launched its new international trading platform—India International Exchange—at IFSC in Gujarat International Finance Tec-City. Last month, BSE’s younger rival National Stock Exchange launched its own platform at the centre.