The Central Government recently put the onus of regulating the practices of market index providers on the Securities Exchange Board of India (SEBI).
About Index Provider:
- Index providers are those institutions that formulate and manage indices.
- One of the important roles of the index provider is to classify and define markets, as their indices represent a market or a proportion of a market and provide a benchmark of performance for that market or sector.
- They have the responsibility to set the rules that decide what securities to include in each index, how the index will be managed and how securities will be added or removed from that index over time.
- They also usually determine how stocks can be classified, e.g. is a particular stock a Healthcare or an Oil & Gas stock, or is it a Developed or Emerging market stock.
- An index allows investors and other stakeholders to get a snapshot of the market.
- S&P Dow Jones, MSCI, and Bloomberg are some of the globally renowned institutions that provide indices.
- In India, this activity is generally carried out by subsidiaries of stock exchanges. The most prominent indices in India are the Nifty50 by NSE Indices and Sensex provided by a venture of S&P Dow Jones Indices and BSE Lied.
Q1) What is the Securities Exchange Board of India (SEBI)?
The Securities and Exchange Board of India (SEBI) is the leading regulator of securities markets in India, analogous to the Securities and Exchange Commission in the U.S. SEBI has wide-ranging regulatory, investigative, and enforcement powers, including the ability to impose fines on violators.