Gupta panel move irks Sebi

"It is wrong to say that it was not required to go into the regulatory aspect. We did not set up such a huge committee to merely get an academic report on whether we should have derivatives or not," said a Sebi source.

Admitting that the process has taken far too long than it should have, especially when the real issue of regulatory measures to be adopted is yet to be addressed, Sebi sources said that the first part of the report has been submitted to the regulator without the signatures of all the panel members..

It is learnt that this was done to avoid any further delay in submission of the report, but Sebi authorities feel that it is incorrect to take up a report for further action if the members of the committee have themselves not endorsed it.

They allege that a similar situation had arisen when the draft report was submitted to Sebi. "Even then the endorsement of all the members of the committee was not taken," said a Sebi source.

Sebi officials are now drawing a parallel to the Justice Bhagwati report on takeovers where the policy framework as well as a detailed regulatory structure was recommended. The delay in the committee’s completion of the report has in fact miffed even the committee members. Whilesome have blamed Sebi for the delay, others feel that having an unwieldy committee has led to the delay. "Our idea of having such a huge committee was to be very sure of what we are getting into.

Gupta had, a few days before submitting the first part of the report, asked members to submit their final views on the subject at the earliest. He had also questioned the contention of BSE president M G Damani to suggest in his dissent note that the panel was required to look into exchange level rules and regulations as well.

Advisory committee mooted

The L C Gupta committee on introduction of derivatives has called for the setting up of an advisory committee for the derivatives market. This would involve a greater co-ordination between Sebi and the RBI.

In a presentation at the IOSCO-APRC meeting on "Development of derivatives market in India", senior executive director of Sebi, O P Gahrotra, said that the derivative exchange would act as a self-regulatory organisation with Sebi acting regulator asthe last resort.

Highlighting the committee’s major recommendations, Gahrotra said that it has advocated a separate clearing mechanism, qualified brokers and dealers, regulation of sales practices and a continuation of the on-going reforms in the underlying securities markets. As regards the eligibility criterion for exchanges introducing derivatives trading, Gahrotra said that existing exchanges may introduce it. A multiple-derivatives exchange model has been proposed for ensuring a competitive environment. The committee has also called for an independent governing board for the derivatives segment. This would have to be conducted online and with a minimum of 50 members .