The bid to introduce a three-year track record in the information technology business before making an IPO will stop non-IT firms especially former finance companies from tapping the capital market under the guise of IT companies. This will help protect gullible investors.

But the questionable decision is with regard to stock exchanges being allowed to expand into other cities, apart from their regional centres. This could lead to some unhealthy trends. First, there will be a replication of trading systems. The NSE has already proved that it is the premier bourse in the country and withits efficient national systems has put all the other exchanges on notice. The BSE has not been very successful with its expansion plans, so why should the other regional SEs or even the ISE for that matter have a better experience? Replicating the NSE's systems, which is what the relaxation will permit, will simply end up being a waste of resources.

Second, it is quite likely that the regional SEs will need a lot of funds to expand their network and that could prompt them to enter into loose ties with regional brokers to encourage participation. This could undermine the credibility of the system in the long run. Sebi should find it worthwhile to re-think on SE expansions and in fact go one step further and withdraw permission to existing regional SEs from functioning or at least encourage consolidation of SEs.