Sebi issues relaxed norms for setting up IFSC; clears way for GIFT City

Capital market regulator Securities and Exchange Board of India (Sebi) on Sunday approved relaxed rules for setting up of stock exchanges and other capital market infrastructure, as part of its efforts to create a vibrant international financial services centre (IFSC) in India, on the lines of Dubai and Singapore.

Sebi has relaxed norms on shareholding and net worth for Indian as well as foreign stock exchanges, clearing corporations and depositories for setting up subsidiaries to undertake similar business in IFSCs.

In addition, existing stock exchanges are also permitted to set up clearing corporations in IFSC. Combined, these measures are expected to help check the flight of trading in rupee and Indian securities to such offshore financial hubs.

This clears the way for the setting up of the Gujarat International Finance Tec-City (GIFT), announced by the finance minister in the Union Budget for 2015-16.

All Institutions in IFSC will comply with the principles laid down by the International Organisation of Security Commissions (IOSCO) and the principles for Financial Market Infrastructures (FMIs) and such other governance norms specified by Sebi. 

Sebi-registered intermediaries or recognised intermediaries of foreign jurisdiction are permitted to operate as securities market intermediaries in IFSC through a subsidiary or joint venture company.

The guidelines, inter alia, permits issue of depository receipts and debt securities in IFSC by domestic as well as foreign companies subject to the Foreign Currency Depository Receipts Scheme, 2014 and relevant Sebi (Issue of Capital and Disclosure Requirement) Regulations. 

The guidelines also provide for listing and trading of equity shares issued by companies incorporated outside India, depository receipts, debt securities, currency and interest rate derivatives, index based derivatives and such other securities as may be specified by Sebi from time to time.

Non-resident Indians, foreign investors, institutional investors, and resident Indians eligible under FEMA may participate in IFSC.

Mutual funds and alternative investment funds set up in IFSC can invest in securities listed in IFSC, securities issued by companies incorporated in IFSC and securities issued by foreign issuers.

Sebi said it would specify the norms and relaxations by way of guidance notes or circulars, for implementation of these guidelines to facilitate and regulate financial services relating to securities market in an IFSC.

These guidelines facilitate and regulate financial services relating to securities market in an International Financial Services Centre (IFSC) set up under section 18(1) of Special Economic Zones Act, 2005 and matters connected therewith or incidental thereto.

The broad framework of securities laws has been made applicable to the entities operating in IFSC with certain carve-outs as specified in the guidelines.