Action on the Securities and Exchange Board of India’s (Sebi) plan for closure of regional stock exchanges (RSEs) is set to pick up, with a number of regional exchanges showing interest in winding up.
Three RSEs have already sent a request for closure. A senior Sebi functionary confirmed the move and said action on the regulator’s plan was expected to hasten in the next few months. “Sebi is serious on implementing the policy quickly,” he added, but declined to divulge the names of the exchanges which had sent in their request for winding up.
The interest shown by some of the exchanges for closure is significant, as the Sebi decision on RSEs has been challenged in the Gujarat and Allahabad high courts.
In a notification issued on June 20, Sebi had said all stock exchanges which did not have a net worth of Rs 100 crore and annual turnover of Rs 1,000 crore would be de-recognised. An exchange without any trading at its own platform or where the annual trading was less than Rs 1,000 crore might apply for voluntary derecognition and exit, according to the plan.
If the stock exchange eligible for voluntary derecognition, does not apply for voluntary derecognition and exits within a period of two years from the date of notification, then Sebi would proceed with compulsory derecognition and exit of such an exchange.
There are 16 Sebi-recognised RSEs in India, including the Ahmedabad Stock Exchange, Calcutta Stock Exchange, Delhi Stock Exchange and Bangalore Stock Exchange. Hardly any trading takes place on any of these RSEs.
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In the current scenario, almost all the RSEs will have to tie up with either the Bombay Stock Exchange (BSE) or the National Stock Exchange (NSE) for survival.
Through this route, companies listed on an RSE could be traded on a national stock exchange and the members could also be permitted to trade in shares of companies listed on a national exchange.
The Madhya Pradesh Stock Exchange and Calcutta Stock Exchange have tied up with both BSE and NSE, while Madras Stock Exchange has a tie-up with NSE.
Sebi has also given three years to stock exchanges to meet the Rs 100-crore minimum net worth criteria, an increased requirement. This, however, would be difficult to achieve for many of the regional exchanges.