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SEBI to launch Volatility index in a month’s time

— PHOTO: K. PICHUMANI

MORE IN THE PIPELINE: S.Santhana Krishnan (right), Symposium Director, having a word with M. Damodaran (centre), Chairman, SEBI, at a seminar on corporate governance in Chennai on Saturday. Ved Jain (eft), Vice-President, ICAI, looks on.

CHENNAI: The Indian markets have been on a bull run with the Sensex gaining nearly 40 per cent in 2007. But it has been a rocky ride on some days, and analysts and investors have grappled with wild intra-day swings and corrections. In a month’s time, a new product will be introduced reflecting this trend: a volatility index. “If you understand what volatility is, and if you have a take on it, you can express that through investing in this product,” said Securities and Exchange Board of India Chairman, M. Damodaran, speaking on the sidelines of a seminar on corporate governance organised by the Institute of Chartered Accountants of India (ICAI) in Chennai on Saturday.

The volatility index is one of the seven new products that SEBI proposed to introduce at a board meeting last month. The first of the new products, mini contracts in equity indices, which would help individual investors to hedge an underlying portfolio, had already been introduced to the market. The second product, options contracts with a longer life or tenure, would be introduced in ten days time, he said. Other new products in the pipeline include options on futures, bond indices and F&O contracts, exchange-traded currency (foreign exchange) F&O contracts, and the introduction of exchange-traded products to cater to different investment strategies. SEBI was still consulting with the Reserve Bank of India on several of these products, he said.

Addressing the seminar, Mr. Damodaran ruled out any dilution of the norms for independent directors in listed companies as stated in Clause 49 of the listing agreement and denied any contradiction with the views of the Company Law Bill. While the Bill, following the recommendations of the Irani Committee, stipulates that a third of a company’s board members must be independent directors, Clause 49 says that 50 per cent of a listed company’s board must constitute independent directors. “We put Clause 49 in place after five years of consultation,” said Mr. Damodaran, explaining that while the Bill applied to all companies, Clause 49 merely stipulated more stringent norms for one category of companies, those which were listed. Should Parliament pass the Bill in its current form, “Clause 49 will stand amended,” he said.

The SEBI chief reported smooth progress in the process of registering foreign institutional investors (FIIs), since the market regulator issued restrictions on Participatory Notes in October. In the last two months, SEBI has registered 140 FIIs and 275 sub-accounts.

He urged ICAI to develop a speedier disciplinary process against defaulting chartered accountants, noting that a complaint he signed as a joint secretary ten years ago during the Harshad Mehta scandal was still pending.

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