The Securities & Exchange Board of India (Sebi) has decided to reject a key recommendation of the Chandratre Committee that compulsory listing required by companies at the stock exchange of the region where they are registered be done away with.
"We are not going to accept this. Such a step may help the Bombay Stock Exchange (BSE) and National Stock Exchange (NSE), but it will sound the death knell of the regional stock exchanges," a top Sebi official told Business Standard.
Listing at stock exchanges of the region where they are registered was made mandatory for companies, which have issued shares to the public, through a circular issued by the finance ministry on September 23, 1985.
The Chandratre Committee's recommendation to do away with the requirement had been opposed by all regional stock exchanges at the recent meeting of the Inter Exchange Co-ordination Committee convened by Sebi in Mumbai.
The finance ministry, too, is reported to have expressed opposition to such a measure.
The market regulator has yet to declare its stand officially on the recommendations of the Chandratre Committee, which it had sponsored. The committee's report -- submitted to Sebi in December 1997 -- has been circulated among all the stock exchanges and the regulator is awaiting their response.
Regional stock exchanges are already reeling under the onslaught of computerised trading. They have been able to build up a traded list of securities mostly on the basis of the compulsory listing clause, which results in revenues for the regional stock exchanges in the form of listing fees, besides adding to their trading volumes. It also enables people to trade in the shares at the stock exchange of their region.
If the mandatory listing clause is dropped, trading volumes and revenues of regional stock exchanges would fall sharply. These exchanges have also suffered as a result of a strategic shift in trading pattern towards large stock exchanges, as investors gravitate towards the big boys in search of better rates and higher liquidity.
In 1996-97, seven of the 23 stock exchanges registered with Sebi accounted for 96 per cent of the total stock trading volume in the country.
These are NSE, BSE, and the stock exchanges of Calcutta, Delhi, Ahmedabad, Uttar Pradesh and Pune.
NSE alone accounted for 46 per cent of the total trade, followed by BSE with 19 per cent.
The regional stock exchanges, on the other hand, registered negative growth in trading volumes during 1996-97 in comparison to the previous year. The Hyderabad Stock Exchange registered the sharpest decline of 62 per cent, followed by the stock exchanges of Kutch (30 per cent), Guwahati (22 per cent) and Coimbatore (4.19 per cent).
