BSE becomes India’s first exchange to be recognized as a DOSM by the US SEC

BSE becomes India’s first exchange to be recognized as a DOSM by the US SEC

Context: Asia’s first stock exchange, the Bombay Stock Exchange (BSE) has become the first stock exchange in India to have received recognition as a ‘Designated Offshore Securities Market’ (DOSM) from the United States Securities and Exchange Commission (SEC).

Implications:

The DOSM status allows the sale of securities to U.S. investors through the trading venue of BSE without registration of such securities with the US SEC and thus eases the trades by US investors in India.

Background:

Prior to this recognition, investors who wished to sell such securities (i.e., equity or debt securities issued by BSE listed companies in a private placement under the U.S. securities laws) had to take certain measures to ascertain the location of the purchaser prior to re-selling.

The availability of a liquid resale market is expected to:

Make exempt offerings by BSE-listed companies more attractive to U.S. investors.

Enhance the attractiveness of Indian Depository Receipts (IDRs) amongst US investors.

What is an IDR?

An IDR is a depository receipt denominated in Indian rupees issued by a domestic depository in India. Much like an equity share, it is an ownership pie of a company. Since foreign companies are not allowed to list on Indian equity markets, IDR is a way to own shares of those companies. These IDRs are listed on Indian stock exchanges.

IDRs and equity shares:

IDRs are similar to equity shares. IDR holders have the same rights as shareholders; They can vote for or against company moves or decisions as and when it comes to them, get dividends, bonus and rights issues as and when the company declares them.
What’s important?

Sources: the hindu.