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Kolkata: The dowager of Lyons Range was on Wednesday handed the death warrant when the Securities and Exchange Board of India (Sebi) wrote to the Calcutta Stock Exchange (CSE), laying down the guidelines its management must follow as the bourse rides out of the country’s capital market, ending a 106-year journey.

An icon of market economy and a relic from the times Kolkata, as Calcutta, was the business capital of India, she survived the flight of businesses from West Bengal and 34 years of Communist rule, but couldn’t cope in an inter-connected economy, where share trading became paperless.

The vacant trading hall at this Lyons Range edifice in the backyards of Writers’ Buildings—the state’s now abandoned administrative headquarters—hardly has any remains from its glorious past. Sebi had in April 2013 halted trading on the CSE’s own platform, asking it to forge a partnership with an external clearing house. It couldn’t reach an agreement on risk-sharing with any service provider.

Sebi now threatens to cancel CSE’s registration as an exchange, which it received way back in the early 1980s from the then regulator, Controller of Capital Issues.

Stockbrokers milling around in Lyons Range do not seem to care. For them, the exchange lost relevance years ago. Only some 100-odd employees are speculating over ways to defer the inevitable.

Though held up in his office by agitated employees till around 1.30am on Thursday, managing director and chief executive officer B. Madhav Reddy put up a brave front, saying that Sebi’s notice wasn’t an instruction to wind up operations by the end of May.

It is only a routine “reminder" that CSE could be stripped of recognition because trading on its platform had stopped, Reddy says, even as he rues that the exchange’s latest move to stay afloat was completely ignored by the markets regulator.

Only this week, CSE got into two separate agreements with Indore-based Madhya Pradesh Stock Exchange and the Over the Counter Exchange of India (OTCEI)—two bourses facing a similar threat as the one at Lyons Range—to take over their business and active trading members.

The aim is to create a larger platform by combining the regional stock exchanges. CSE has close to 200 active members; Indore has around 120, according to Reddy. That apart, some 2,500 firms are listed on CSE, of which shares of around 1,500 are traded exclusively at Lyons Range. “What’s going to happen to the shareholders of these companies?" he asks.

The markets regulator has never had much sympathy for such firms and, understandably so, because a decade ago it had to launch a drive to weed out companies from CSE that lent themselves to collusive trading aimed at tax evasion, a practice which, in Lyons Range’s parlance, used to go by the name jama-kharchi.

Already under pressure from India’s top two bourses—National Stock Exchange (NSE) and BSE (then Bombay Stock Exchange)—Lyons Range fell from glory in March 2001. A clutch of stockbrokers exploited a bug in the exchange’s margin calculation software to speculate on shares far beyond their means.

When these shares crashed, they defaulted, triggering a nationwide stock market crash.

It wasn’t the first time stockbrokers in Kolkata had failed to pay their dues but, in 2001, the patriarchs who previously used to handle crises at Lyons Range no longer enjoyed the support of the regulators. Control by then had begun to slide to professionals under the watch of Sebi, which in 2004 forced bourses such as CSE to turn into corporations from associations.

In the days of open outcry, patriarchs had the last word on the trading floor. They halted trading if the members’ losses expanded beyond their liking and found within constraints the most equitable solution for the larger community. To make sure that such interventions weren’t widely reported, they only had to make sure that the Press Trust of India (PTI) representative was ousted from the trading floor.

In those days, only PTI had access to the trading floor during market hours and sent out regular updates.

When the patriarchs held Lyons Range in their sway, they could haul rogue stockbrokers out by their collar or lock them up in elevators.

But in the days of electronic trading, CSE had to find unique ways to compete with NSE and BSE.

From the days of its inception in 1908, its traditional strength has been trade-financing and forward trading.

Repeated attempts by regulators to ban forward trading failed. When it was banned, it popped out to the so-called kerb outside the trading hall. When the ban was lifted, a new trading session called badla had to be introduced.

But badla eventually proved the undoing of the exchange, costing CSE at least 120 crore and a great deal of credibility when stockbrokers defaulted in 2001. The joint parliamentary committee that probed the scam concluded that trades were routed to CSE only because of a laxity in enforcing margin regulations.

At the same time, the investigation couldn’t conclusively determine if the software bug was introduced with malfeasance.

As CSE embarks on what appears to be its last journey—the winding up of operations as an exchange—its board called an emergency meeting on Thursday, but in the wake of the agitation on Wednesday, it was held at an undisclosed location.

Its managers did not display in its trading hall the notice it received from Sebi on Wednesday.

The notice, reviewed by Mint, clearly says that CSE’s shareholders should be informed about the development.

Reddy says its members still generate about 300 crore of transaction for NSE and BSE every day; but even if he manages to keep CSE from being wound up, stockbrokers are unlikely to return to the empty trading floor at Lyons Range.

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