The war over trading time extension and the charge that exchanges can't be run for profit alone is coming at a time when the Securities and Exchange Board of India (SEBI) is pondering over the same issue. The market regulator will soon come out with a detailed paper on the entire question of governance of securities markets infrastructure entities. The paper is expected to raise several issues such as who should own exchanges and how should they be run.

Sebi will now come out with a detailed discussion paper raising the whole issue of governance of all entities related to Securities market infrastructure which includes stock exchanges, clearing corporations and depositories. The thought behind this paper is that not much thinking or perhaps deliberation has gone in to how they should be owned. Therefore, certain questions are being raised.

It is not a paper that will give final answers but will provoke debate. On the issue of ownership, the way the law has evolved, the stock exchanges should not be owned by any single identifiable promoter, if he has to offload his stake to institutions within a given time. However, when it comes to depositories, there is an identifiable sponsor, which the law requires. NSDL and CSDL had to be promoted by an identifiable sponsor.

Therefore, there are contrary moves or contradictory ways in which institutions have evolved. On clearing corporations, no thought has gone in. It is entirely by accident and the clearing corporations. Their networth and ability to stay solvent can become very important at a time when complex derivatives will get traded on these exchanges. They will become central counter parties to very complex instruments. 

At such a time questions like, will banks be willing and able to take a bet on the solvency of the clearing corporation itself, should there be various clearing corporations for different markets, should there be one clearing corporations for all markets so that systemically you know which entity is solvent, are questions which the paper will raise.

The trigger for this appears to come in consultation with the finance ministry. This has got nothing to do with the current debate in the trading timing. The purpose for this paper is the ongoing of the crises last year when several entities like banks, having good profits, ended up disturbing financial stability.

At least the regulators and people in the finance ministry are ahead in terms of sensing and smelling these problems. Therefore, something good is going to come out of all this.