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๐’๐„๐๐ˆ ๐ง๐จ๐ญ๐ข๐Ÿ๐ข๐ž๐ฌ ๐ญ๐ก๐ž ๐ˆ๐ง๐๐ž๐ฑ ๐๐ซ๐จ๐ฏ๐ข๐๐ž๐ซ๐ฌ ๐‘๐ž๐ ๐ฎ๐ฅ๐š๐ญ๐ข๐จ๐ง๐ฌ

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SEBI has recently notified the Index Providers Regulations which inter alia provide for a regulatory framework for Index Providers in the securities market with the objective of fostering transparency and accountability in governance and administration of Indices. The Regulations are set to come into force on the one hundred and eightieth day from the date of their publication.

The SEBI Board had during its meeting on November 25, 2023 taken up the proposal for introduction of Regulatory Framework of Index Providers which included a draft of the Index Providers Regulations. However, there is some variance between the proposed regulations and the notified regulations.

The notified Regulations define an โ€˜Indexโ€™ to mean prices, estimates, rates or values, used in relation to securities that are (a) made available to subscribers; whether free of charge or for payment; (b) calculated periodically; entirely or partially by the application of a formula or another method; (c) used for determining the price at which a financial instrument may be bought or sold or traded; (d) used for measuring the performance of a financial instrument. However, the notified Regulations have done away with the differentiation between โ€˜Domestic Benchmarkโ€™ (Index providers incorporated in India and providing an Index of Indian / foreign securities in India) and โ€˜Foreign Benchmark (Index providers NOT incorporated in India and providing an Index of Indian / foreign securities in India) which was proposed in the draft Regulations.

The notified Regulations also donโ€™t seem to have included the concept of a โ€˜Public Good Indexโ€™ which was proposed in the draft Regulations to include any index tracked by Mutual Fund schemes with over 50,000 crores AUM cumulatively. 

The notified Regulations are only applicable to โ€œSignificant Indicesโ€ which are Indices that are tracked or benchmarked by domestic mutual fund schemes and are having cumulative AUM above a certain threshold (to be specified at a later stage by SEBI) and are consisting of securities listed on a recognized stock exchange in India for use in the Indian securities market. However, the draft Regulations were applicable to a broader range of Index Providers.

The notified Regulations have also done away with the proposed requirement of five years of experience in the administration of the index / benchmark for any applicant seeking to apply for registration.

Further, several of the other mechanisms and requirements which were proposed based on the International Organization of Securities Commissions (IOSCO)โ€™s Principles for Financial Benchmarks have largely been retained in the notified Regulations.

A copy of the Gazette notification is enclosed herewith.

Readers are welcome to share their views withย Regstreet Law Advisorsย onย info@regstreetlaw.com.

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