New Delhi, Nov. 21: The finance ministry is likely to soon announce rules for foreign investment in stock exchanges. It is expected to allow FDI up to 26 per cent in bourses but with a lower voting right. The ministry is also likely to allow an additional 23 per cent investment by FIIs.

There are reservations in the government over foreigner control of stock exchanges, which are vital to the economy.

To check this, voting rights may not be in proportion to shares, allowing a degree of control by Indian entities over the bourses.

Besides, clauses similar to lock-in conditions are likely to be imposed on the FDI to prevent transfer of shares to undesirable foreign parties.

The finance ministry is likely to empower Sebi with authority to vet investment and board composition applications.

“There is a feeling that unless this is done it would be difficult to control sales and ultimately at some stage control of a major bourse like the BSE might land up with a foreign corporation about whom India may not be too happy,” officials said.

The note drawn up by the North Block wants to keep FDI in stock exchanges pegged at 26 per cent. But voting rights may be capped at 5-10 per cent. North Block officials said they have been in touch with both Sebi and RBI on this issue.

Sources said Sebi favoured the proposal as the regulator perceives an ownership vacuum when brokers divest a part of their holdings that may be filled up by FDI. US stock exchanges have already evinced interest in a Stake in the Bombay Stock Exchange.

Officials said the rules were in place but the government was delaying on the announcement as the rules might be tweaked to incorporate the norms on security in FDI proposals that is expected shortly. The government wants to bring in such norms for sensitive sectors like telecom and aviation.

RBI and Sebi had been consulted on regulatory issues for both stock exchanges as well as depositories, officials said. The Bombay Stock Exchange has already said it wants to bring in a strategic partner as well as make an initial public offer of about 25 per cent of its shares. In all, brokers will vacate about 49 per cent stake in the bourse.

Officials do not expect foreign investors to be interested in any stock exchanges in India other than BSE and National Stock Exchange.