Sebi’s regulatory framework for index providers comes into effect
Under Sebi's new framework, index providers offering indices for use in India have to be registered with the regulator and get authorization for the introduction of such indices. The index is the key element in trading, as it helps investors gauge the overall market sentiment.
The regulatory framework laid out for index providers by the Securities and Exchange Board of India () has come into effect, and this is aimed at strengthening transparency and accountability in the administration of benchmark indices.Under Sebi's new framework, index providers offering indices for use in India need to be registered with the regulator and get authorization for the introduction of such indices.
Secondly, an index provider must have a minimum net worth of Rs 25 crore and must have a minimum of 5 years of experience in index administration.
An index provider must constitute an oversight committee to review the existing index design. The committee must also review the index methodology to ensure it reflects the nomenclature and description of the index.
The index is the most essential element in stock market trading, as it helps investors gauge the overall sentiment.
Moreover, several indices are linked to financial products such as exchange-traded derivatives, , (), and market-linked debentures. Indices are also used as a benchmark for actively managed mutual funds.
Currently, the benchmarks and indices tracked by the fund managers are owned and managed by entities of the BSE and the National Stock Exchange.
Today, there are over 200 passive products, including ETFs or index funds in the Indian capital markets, compared to just 8 products in 2008.
The market regulator believes that a conflict of interest could arise in the governance and administration of such indices and benchmarks due to the presence of an element of discretion in the management of such indices.
As a result, the new framework has been laid down to increase scrutiny of index providers.
An index provider must constitute an oversight committee to review the existing index design. The committee must also review the index methodology to ensure it reflects the nomenclature and description of the index.
The index is the most essential element in stock market trading, as it helps investors gauge the overall sentiment.
Moreover, several indices are linked to financial products such as exchange-traded derivatives, , (), and market-linked debentures. Indices are also used as a benchmark for actively managed mutual funds.
Currently, the benchmarks and indices tracked by the fund managers are owned and managed by entities of the BSE and the National Stock Exchange.
Today, there are over 200 passive products, including ETFs or index funds in the Indian capital markets, compared to just 8 products in 2008.
The market regulator believes that a conflict of interest could arise in the governance and administration of such indices and benchmarks due to the presence of an element of discretion in the management of such indices.
As a result, the new framework has been laid down to increase scrutiny of index providers.
Source: Stocks-Markets-Economic Times
