The Delhi Stock Exchange (DSE) has once again decided to float a subsidiary with initial contribution from member brokers towards its paid-up capital. The subsidiary will take a Bombay Stock Exchange (BSE) membership to facilitate its members to trade on the Mumbai bourse.
According to DSE sources, Vijay Bhushan, the new president of the bourse, has recently circulated a letter amongst bourse members regarding the subsidiary plan.
The move is to be seen in the wake of the recent drop in volumes on the DSE to just around a couple of crores, they said. The former DSE president had also mooted the idea of floating a subsidiary with equity contribution of around Rs 4-5 crore from the bourse.
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The plan had attracted the notice of the Securities and Exchange Board of India (Sebi) and the Union finance ministry since as per a Central government circular an exchange cannot contribute towards the equity of a subsidiary seeking membership in another exchange. The plan was subsequently dropped. According to DSE sources, the move is a prelude to the 100 per cent acquisition of the exchange by BSE.
The Mumbai bourse had also suggested this plan in the interim period pending consolidation of the two exchanges. DSE president Vijay Bhushan said, "The board is meeting on December 8. Floating a subsidiary is one of the items in the agenda."
On the number of members who are expected to fork out Rs 1 lakh as contribution for the subsidiary, he said he would not hazard a guess.
He, however, said this arrangement would ensure a smooth transition to the consolidation process and consequent demutualisation.
The Sebi board, which is scheduled to meet on December 14, is also likely to take a final view on demutualisation.
D R Mehta, chairman, Sebi, had two days back said demutualisation of stock exchanges is one of the top items in the agenda at the December 14 board meeting.
Both the BSE and DSE board have already given an in-principle approval for the merger of the two exchanges. BSE is also scheduled to make a presentation to the members of DSE on the trading facilities that would be provided to them next week.
BSE and DSE had recently inked a deal wherein BSE provided free connectivity at the DSE premises for trading on the Mumbai bourse.
"However, this has not been very successful," a DSE member said.