15 regional stock exchanges to shut operations as Sebi deadline approaches
Trade volumes are zero for RSEs and thus they won’t be able to meet the regulator’s new net worth and trading norms
Mumbai: With the 30 May deadline for stock exchanges to meet new net worth and trading norms looming large, 15 of the 20 stock exchanges in the country have opted to exit the business altogether.
According to two people directly familiar with the matter, including an official of Securities and Exchange Board of India (Sebi), 11 regional stock exchanges (RSEs) have already submitted their exit applications to Sebi, while the boards of four other exchanges will be meeting later this month to consider the resolutions related to closure of business. Neither of the two people wished to be identified.
The Bombay Stock Exchange (BSE), United Stock Exchange (which agreed to merge with BSE), MCX Stock Exchange Ltd (MCX-SX), National Stock Exchange (NSE) and the Calcutta Stock Exchange will continue in business, said the first person.
Of the remaining 15 stock exchanges, 11 have already applied to exit the business, said this person. The other four are also working towards this, he added.
“The Madras Stock Exchange is convening meeting for passing the resolution for an exit. Ahmedabad Stock Exchange and Delhi Stock Exchange are also convening the meeting for an exit. The MPSE (Madhya Pradesh Stock Exchange Ltd) is also working on an exit.”
Sebi’s new norms for stock exchanges mandate minimum net-worth of Rs.100 crore and an annual trading of Rs.1,000 crore. The stock market regulator gave the recognized stock exchanges two years to comply or exit the business.
Ramanatha Kotagal, managing director of Madras Stock Exchange, said in an e-mail “the exchange is holding an extraordinary general meeting on 26 May, where shareholders would deliberate” possible exit from the business.
The regional stock exchanges in Jaipur, Cochin, Delhi, Vadodara, Madhya Pradesh, Ludhiana, Pune, Bhubhaneswar, the Inter Connected Stock Exchange Ltd and Uttar Pradesh did not respond to e-mails seeking comment.
According to the monthly bulletin released by Sebi in April, other than BSE, NSE and MCX-SX, all equity exchanges reported zero volume of trading in March. Indeed, for all of 2013-14, all regional stock exchanges reported zero turnover, Sebi data shows.
Experts say that the exit of regional exchanges is inevitable as national exchanges such as BSE and NSE have expanded their reach across the country—making regional bourses less relevant.
“In today’s connected world, staying financially viable is very difficult for the regional stock exchanges. They were launched in a different era when BSE and NSE did not have reach, which they boast of today. The regulator should see to it that while the regional exchanges exit the business, the companies listed on such exchanges and investors do not get affected,” said Rajnikant Patel, a former managing director and chief executive officer of the BSE.
According to the second person familiar with the development, some exchanges tried seeking legal recourse to save themselves from the de-recognition, but the courts refused any kind of relief.
“With the courts firmly telling the bourses to comply with the Sebi norms or face action, the process of exit was duly initiated by boards of the regional bourses,” this person said.
Dharmishta Raval, former executive director in-charge of Sebi’s legal cell, confirmed that Vadodara Stock Exchange and the brokers representing Ahmedabad Stock Exchange filed separate petitions in the Gujarat High Court, challenging the process and the regulator’s powers to de-recognize an exchange.
“Two regional bourses had challenged the Sebi circular on the exit policy for stock exchanges but both have been disposed,” added Raval.
In January 2013, Sebi allowed the Hyderabad Stock Exchange to exit the exchange space—the first such by a regional bourse after Sebi introduced exit norms for exchanges in May 2012.
Thereafter in April 2013, Sebi approved the exit of Saurashtra Kutch Stock Exchange Ltd.
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