Industry players said NSE Indices, which compiles popular indices such as the Nifty50 and Nifty Bank, and Asia Index (AIPL), which compiles the Sensex, will have to register with Sebi | File image
The Securities and Exchange Board of India (Sebi) has mandated registration of index providers managing “significant indices” based on securities listed in India to foster transparency in governance and administration of financial benchmarks in the securities market.
The regulator on Friday notified the Sebi Index Providers Regulations, nearly a year after its board first approved the norms.
The global index providers, however, may not have to register with Sebi unless their indices are used as benchmarks by domestic asset managers with large corpus.
Sebi has excluded indices that are for exclusive use in a foreign jurisdiction. Benchmarks regulated by the Reserve Bank of India (RBI) are also excluded from these regulations.
The RBI issued a framework in December mandating index providers that compile indices based on domestic debt to register with it.
Industry players said the NSE Indices, which has popular indices such as the Nifty50 and Nifty Bank, and the Asia Index (AIPL), which compiles the Sensex, will have to register with Sebi.
APIL is an equal joint venture between the BSE and S&P Dow Jones Indices. However, S&P Dow Jones Indices has announced its plan to exit the JV.
Other popular index providers that operate indices based on Indian securities are MSCI, Nasdaq and FTSE Russel.
However, they may not have to register as they are largely used by overseas investors. Those impacted will not just have to register with Sebi, but also have to make the methodology documents public, follow a code of conduct, and bring more transparency on inclusion and exclusions.
Global regulators are increasingly trying to get a handle on index providers, given their growing influence and ability to sway the markets.
SM REITs for fractional ownership in real estate
The market regulator also amended the regulations on Real Estate Investment Trusts (REITs) to facilitate Small and Medium REITs — allowing fractional ownership platforms in real estate to issue these REITs.
With the changes, both residential and commercial properties with a minimum value of Rs 50 crore can be included in SM REITs. Till now, only large-scale commercial properties could be part of REITs.
Sebi had first approved the regulations in November last year. While the industry had welcomed the decision, they were awaiting clarity on net worth requirements and sponsor holding.
Industry players have said that more players would prefer to come through this route as the regulatory coverage gives more confidence to investors.
These platforms which allow co-ownership of a real estate asset earlier had a minimum investment limit of Rs 25 lakh to Rs 50 lakh. Now, those coming through SM REITs, have a minimum investment size set at Rs 10 lakh.
“SM REITs can leverage their investments by borrowing up to 49 per cent of the asset value. Further, it brings the sponsor’s skin in the game.
The sponsor of the SM REIT has to invest their own capital (5 per cent with no leverage, 15 per cent with leverage). This ensures alignment of interests between the sponsor and investors,” said a legal expert.
First Published: Mar 10 2024 | 11:34 AM IST
