In April 2012, the Securities and Exchange Board of India (Sebi) had said an exchange without any trading platform or one with annual trading of less than Rs 1,000 crore should apply for voluntary de-recognition and exit. It had given exchanges three years to meet a net worth criterion of at least Rs 100 crore each.
Recently, U K Sinha, chairman, Sebi, had said regional stock exchanges (RSEs) in India had lost their relevance and the stock market regulator will actively encourage winding up of these exchanges.
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CSE, in which Bombay Stock Exchange (BSE) has a stake of five per cent, is the only regional exchange to be compliant with the new Sebi rule.
“We recently received communiqué from the Ludhiana Stock Exchange, that they are interested for consolidation with CSE. They have asked for certain concessions, which we are looking into,” said B Madhav Reddy, managing director and chief executive, CSE.
“Sebi does not feel that RSEs should exist, so we either have to voluntarily shut down or look for consolidation. CSE is the only RSEs to meet the Sebi criteria. So, we have sought a consolidation. However, this is not a final decision, as we have sought some clarifications from CSE,” said V P Gaur, chairman of Ludhiana Stock Exchange.
Also, Ludhiana Stock Exchange would seek joint management and prefer to work under the banner of a new exchange, rather than CSE, said Gaur.
However, for CSE too, the road to revival is not smooth.
Recently, CSE had to suspend operations on the C-Star trading system. This followed a Sebi notification asking the exchange not to continue with the clearing and settlement activities of trades executed on the C-Star system through its clearing house beyond April 5, 2013. According to the new rule, CSE would need to establish a clearing corporation in compliance with the provisions of the Stock Exchanges and Clearing Corporations (SECC) Regu-lations, 2012
The exchange was looking for a possible tie-up with a clearing house to resume the operations of the C-Star, said Reddy.
About 6,000 companies are listed on regional exchanges.
To meet the Sebi criterion, Madras Stock Exchange had earlier proposed setting up its own trading platform. To stay afloat, almost all regional exchanges have adopted the subsidiary route, under which a regional exchange floats a subsidiary or an entity formed by its members that acquires membership of a national exchange. Ties with the national exchanges — the National Stock Exchange and the Bombay Stock Exchange — through subsidiaries have, to a large extent, rendered the idea of individual trading platforms redundant.
Sebi had said trading members of a de-recognised exchange could continue to avail of trading opportunities through an existing subsidiary, which would function as the broking entity of a national exchange.
Regional stock exchanges have been struggling for several years. Revival plans have failed due to factors such as legacy issues and the interference of brokers in day-to-day operations, which lead to management-level exits.