Sebi clears net trading

BANGALORE: The Securities & Exchange Board of India (Sebi) has cleared

the stage for the launch of Internet-based trading in securities. To promote

venture capital funding of start-up companies, the Sebi board has also approved

an exemption from the three-year profitability track record for initial public

offerings (IPO) made by companies financed by venture funds.

Sebi chairman D.R. Mehta said, the approval for kicking off Internet-based

securities trading is based on the recommendations of a committee set up by SEBI

for this. The SEBI board took the view that Internet trading can take place in

India within the existing legal framework through use of order-routing systems,

he said.

"There will be an agreement between the broker and the client and a

limit prescribed up to which the client can trade. The client can put his order

and it will go to the exchange mainframe via the broker's filter, so long as it

is within the prescribed limit," he added. Sebi has recommended some

security systems which need to be in place for launching Internet trading,

officials said. The stock exchange will certify the Net-trading software of the

stock broker for compatibility.

The board has also approved the recommendations of the K.B. Chandrasekhar

Committee on VC. Funding for start-ups is expected to be boosted considering the

recommendations of the committee such as a single regulatory system under SEBI

for VC, tax pass-through for VCF's, flexibility in investment and exit for

VCF's, and widening the list of sophisticated institutional investors who can

invest in VCF's. The Chandrasekhar Committee has also recommended that there

should be only one nodal agency regulating the VC industry.