Moneylife:Sunday, February 26, 2012.
The fight for bringing exchanges under the ambit of the RTI Act is not over yet. But MCX’s willingness to be brought under the Act would certainly put pressure on other exchanges.
Multi-Commodity Exchange (MCX), which received a thumping response for its initial public offering (IPO) in a lacklustre market, said that it is in favour of bringing exchanges under the ambit of the Right to Information Act, 2005 (RTI Act) and willing to work with policy makers to develop a framework for it. This is a path-breaking initiative from MCX, which is the first exchange in India to be listed.
As of 5pm on 24th February, the MCX IPO was oversubscribed by 54 times. The issue size of MCX IPO at the upper band is about Rs663.30 crore and with 54 times over-subscription, the total money mobilised comes to about Rs36,000 crore.
In a statement, the commodity exchange said, “MCX is in favour of bringing exchanges under the ‘Right to Information’ (RTI). The exchange will work with policymakers to develop a framework for exchanges’ RTI policy.” This is in stark contrast with other exchanges like the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE), which so far have resisted any attempt to bring them under ambit of the RTI Act.
Surprisingly the Securities and Exchange Board of India (SEBI), which has been accused of a strong pro-NSE bias by the MCX group, has done nothing to ‘persuade’ the bourse that as a first-line regulator, it falls under the definition of ‘state’ for application of the RTI Act, even if it insists it is just a private company. The regulator’s benign attitude to the NSE would have been unexceptional, but for the fact that both SEBI and the Reserve Bank of India (RBI) use every opportunity to emphasise and underline the fact that bourses are ‘public utilities’ (both regulators made this point in September 2010 at the launch of the United Stock Exchange).
Just two weeks ago, Chief Information Commissioner (CIC) Shailesh Gandhi ruled that citizens have a right to know about public-private partnerships (PPPs), which directly or indirectly envisage a partnership with public funds. He also said that any entity which has received finance or grant of over Rs1 crore from the government would constitute “substantial financing” rendering such entity a public authority under the RTI Act.
Earlier in 2007, the CIC had held that stock exchanges are quasi-governmental bodies which are bound to disclose information to the public under the RTI Act. The RTI Act defines a public authority as one that is created by a notification issued by the government or a law passed by Parliament. Stock exchanges are owned by private investors or brokers and have independent managements. NSE is an exception as the majority equity of some of its large shareholders, such as the State Bank of India (SBI), is owned by the government.
SEBI has said that despite their independence in operations, exchanges ought to be classified as public authorities as they can start business only if they are notified by the government. However, so far the exchanges have been adamant about their stance on the Right to Information Act and have resisted the attempts by activists to procure information.
In fact, the NSE even tried to maintain that since it is an autonomous body and not controlled by the government, it cannot be forced to disclose information under the RTI Act. However, SEBI, in an affidavit before the Delhi High Court, said that Government of India or government companies own more than 50% of the shares of NSE. The exchange then tried to dispute the counter affidavit as “contention and not factual statement”. Although the single bench of the high court ruled that NSE is bound to reveal information under the RTI Act, the exchange was successful in getting a stay order from a division bench of the Delhi High Court on the matter.
Last year, the public information officer (PIO) of SEBI directed BSE to allow an RTI applicant to inspect files, documents relevant to the exchange’s market making activities. Earlier in 2009, SEBI slapped BSE with a show-cause notice for engaging in market making without acquiring approvals from the regulator. Market making is artificially creating volumes in the derivatives segment, which infuses liquidity. Market makers quote both ‘buy’ and ‘sell’ for a financial instrument or commodity, hoping to make a profit on the trade.
The fight for bringing exchanges under the ambit of the RTI Act is not over yet. But MCX’s willingness to be brought under the Act would certainly put pressure on other exchanges, which so far have been adamant and reluctant on the RTI Act.
Multi-Commodity Exchange (MCX), which received a thumping response for its initial public offering (IPO) in a lacklustre market, said that it is in favour of bringing exchanges under the ambit of the Right to Information Act, 2005 (RTI Act) and willing to work with policy makers to develop a framework for it. This is a path-breaking initiative from MCX, which is the first exchange in India to be listed.
As of 5pm on 24th February, the MCX IPO was oversubscribed by 54 times. The issue size of MCX IPO at the upper band is about Rs663.30 crore and with 54 times over-subscription, the total money mobilised comes to about Rs36,000 crore.
In a statement, the commodity exchange said, “MCX is in favour of bringing exchanges under the ‘Right to Information’ (RTI). The exchange will work with policymakers to develop a framework for exchanges’ RTI policy.” This is in stark contrast with other exchanges like the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE), which so far have resisted any attempt to bring them under ambit of the RTI Act.
Surprisingly the Securities and Exchange Board of India (SEBI), which has been accused of a strong pro-NSE bias by the MCX group, has done nothing to ‘persuade’ the bourse that as a first-line regulator, it falls under the definition of ‘state’ for application of the RTI Act, even if it insists it is just a private company. The regulator’s benign attitude to the NSE would have been unexceptional, but for the fact that both SEBI and the Reserve Bank of India (RBI) use every opportunity to emphasise and underline the fact that bourses are ‘public utilities’ (both regulators made this point in September 2010 at the launch of the United Stock Exchange).
Just two weeks ago, Chief Information Commissioner (CIC) Shailesh Gandhi ruled that citizens have a right to know about public-private partnerships (PPPs), which directly or indirectly envisage a partnership with public funds. He also said that any entity which has received finance or grant of over Rs1 crore from the government would constitute “substantial financing” rendering such entity a public authority under the RTI Act.
Earlier in 2007, the CIC had held that stock exchanges are quasi-governmental bodies which are bound to disclose information to the public under the RTI Act. The RTI Act defines a public authority as one that is created by a notification issued by the government or a law passed by Parliament. Stock exchanges are owned by private investors or brokers and have independent managements. NSE is an exception as the majority equity of some of its large shareholders, such as the State Bank of India (SBI), is owned by the government.
SEBI has said that despite their independence in operations, exchanges ought to be classified as public authorities as they can start business only if they are notified by the government. However, so far the exchanges have been adamant about their stance on the Right to Information Act and have resisted the attempts by activists to procure information.
In fact, the NSE even tried to maintain that since it is an autonomous body and not controlled by the government, it cannot be forced to disclose information under the RTI Act. However, SEBI, in an affidavit before the Delhi High Court, said that Government of India or government companies own more than 50% of the shares of NSE. The exchange then tried to dispute the counter affidavit as “contention and not factual statement”. Although the single bench of the high court ruled that NSE is bound to reveal information under the RTI Act, the exchange was successful in getting a stay order from a division bench of the Delhi High Court on the matter.
Last year, the public information officer (PIO) of SEBI directed BSE to allow an RTI applicant to inspect files, documents relevant to the exchange’s market making activities. Earlier in 2009, SEBI slapped BSE with a show-cause notice for engaging in market making without acquiring approvals from the regulator. Market making is artificially creating volumes in the derivatives segment, which infuses liquidity. Market makers quote both ‘buy’ and ‘sell’ for a financial instrument or commodity, hoping to make a profit on the trade.
The fight for bringing exchanges under the ambit of the RTI Act is not over yet. But MCX’s willingness to be brought under the Act would certainly put pressure on other exchanges, which so far have been adamant and reluctant on the RTI Act.
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