IFSC bourses get exemption from certain LES requirements

New Delhi: Stock exchanges operating out of the International Financial Services Centre (IFSC) have been exempted from complying with certain requirements related to Liquidity Enhancement Schemes, according to Sebi.

The markets regulator on Thursday said the exemption has been granted in view of the fact that bourses at GIFT (Gujarat International Finance Tec-City) IFSC are at a nascent stage and do not have access to net profits or free reserves.

Internal discussions and consultations with stakeholders were carried out before deciding on the exemption.

As per Sebi norms, the incentives given by the bourses during a financial year should not exceed 25 percent of the net profits or the free reserves of the stock exchange concerned.

Another requirement is that shares that may accrue on exercise of warrants or options given as incentives under all LES in a financial year should not exceed 25 percent of the issued and outstanding shares of the stock exchange.

Now, bourses operating out of the IFSCs would not have to comply with the two requirements pertaining to Liquidity Enhancement Schemes (LES).

The exemption is subject to the condition that the exchange would create a reserve specifically to meet LES incentives or expenses based on the normative study of the scheme in the domestic market, Sebi said in a circular.

Such a reserve should not be included while calculating the net worth.

Based on the normative study of the scheme, stock exchanges at IFSC should furnish proposal for approval, Sebi said.

"We welcome the Sebi guidelines allowing liquidity enhancement schemes at IFSC. This is a step in the right direction to build liquidity, increase participation and develop robust markets at GIFT IFSC.

"We have designed a liquidity enhancement scheme and have approached Sebi to get approval," NSE MD and CEO Vikram Limaye said in a statement.

NSE, in June, had launched its international exchange- NSE IFSC Ltd - at GIFT City.