The viability and need of Regional Stock Exchanges at the present scenario especially after the advent of NSE and its thundering success is a vexatious issue discussed widely all over India.
There are about 24 SEBI recognised Stock Exchanges in India. Out of which only two Stock Exchanges, viz Mumbai Stock Exchange and National Stock Exchange, are really playing the role of a Stock Exchange by having separate live trading platform and by providing necessary depth to the market. All other SEs, mostly through their subsidiaries, have become members of either NSE or BSE or both. Now the members of regional SEs trade only through this route.
Of these 24 Stock Exchanges SEBI has withdrawn the recognition granted to Hyderabad Stock Exchange and Sourashtra Kutch Stock Exchange, derecognised Mangalore Stock Exchange and refused to renew the recognition of Magadh Stock Exchange. As regards Coimbatore Stock Exchange, its members as per SCRA Rules have expressed their lack of desire to renew the recognition and did not intentionally apply for renewal as per AGM resolution. Its recognition, however, expired on 15/9/2006. The balance 19 SEs are demutualised stock exchange.
After the advent of NSE, regional stock exchanges lost all their business to the members of NSE and BSE. Over The Counter Exchange (OTC) which was started with lot of fanfare became a biggest flop and could not survive.
Even BSE has to run for its money and struggle for its survival. Somehow or other it has survived and has come to stay. These two Stock Exchanges have opened their trading terminal in nook and corner thereby taking stock market operations even to remote villages. Thanks to the accelerated growth of Technology.
The Finance Ministry took several steps to revive regional SEs. A new Stock Exchange connecting all regional SEs called Interconnected Stock Exchange was formed which again drew a big flop.
An Expert Committee was formed by the Finance Ministry & SEBI with Hon’ble Justice Kania (former Chief Justice of India) as its Chairman which consisted of eminent personalities from various profession and top officials from SEBI. This Committee was asked to look into Stock Exchange reforms and about regional stock exchanges.After detailed study of all the regional SEs the Committee submitted its report and suggested certain measures. In its study the committee observed that regional stock exchanges have lost their relevance. The Committee, however, did not suggest any exit route to these regional stock exchanges. Its recommendations of demutualisation of Stock Exchanges were accepted by the government.
SEBI approved the demutualisation Scheme of all the Stock Exchanges except Coimbatore Stock Exchange. As per the amended Securities Contract Act it is the duty of SEBI either to approve or reject the demutualisation scheme. But SEBI had not done either in the case of Coimbatore Stock Exchange. This violation by SEBI of SCRA has not been noticed or questioned by anybody so far. A very good precedence for non compliance by none other than the regulator itself !
Another committee was formed under the Chairmanship of Sri G.Anantharaman, wholetime member of SEBI to study the future of Regional Stock Exchanges - Post Demutualisation. The Committee submitted its report on May, 8th 2006. Once again the Committee confirmed that regional SEs have no relevance whatsoever in the present situation. They added that they no longer play any role in economic development and they no longer serve any public interest. They further suggested ways and means to give an exit route to the regional stock exchanges. Even after nearly two and half years SEBI has not taken any action on the report of this Committee.
These regional stock exchanges have not done any transaction for the past 8 or 9 years. It has been confirmed by two expert committees that the regional stock exchanges no longer serve any economic purpose or public purpose. One Committee has even suggested an exit route to such Stock Exchanges.
One stock exchange, Coimbatore Stock Exchange, has already passed resolution clearly expressing its lack of desire to renew its recognition by SEBI and did not apply for renewal.
As per SCRA no member of a Recognised Stock Exchange can do any business other than Securities business. They cannot also get employed elsewhere except stock broking houses. Thus more than 5000 members could not switch over to other business or employment due to this restriction. SEBI should understand that mechanical grant of recognition to dormant Stock Exchanges affects the livelyhood of its members in an indirect way.
But without any valid reason SEBI is not allowing any Regional Stock Exchange to go out of its clutches even after knowing fully well that these are dormant stock exchanges. One could not understand the logic of SEBI granting recognition to these exchanges year after year and its egoistic attitude in preventing stock exchanges from derecognition. The only benefit to SEBI seems to be the fees that are payable by the members of these Stock Exchanges whether they have turnover or not. Probably SEBI is thinking that these poor members are gheese laying golden eggs.
These Regional Stock Exchanges, which are akin to dead bodies, are being treated (what for ? ) in the hospital by name SEBI.
It is high time that SEBI as well as Finance Ministry come to realities and take a practical step towards closure of all unviable and dormant regional stock exchanges. This will also reduce the regulatory burden on SEBI which does not find time to look into the voluminous business done at NSE and BSE.
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Dec 2, 2008 at 01:01:07
THIS IS A VERY VERY GOOD EXAMPLE, WHERE THE TAXPAYERS MONEY IS WASTED BY MEANS OF RUNNING A VERY BIG REGULATOR OFFICE, WITH BRANCHES ALL OVER INDIA, WITHOUT DOING THEIR JOB, FOR THE PURPOSE OF ITS INCORPORATION - THAT IS TO REGULATE TRADING IN THE STOCK EXCHANGES AND NOT TO ALLOW ANY MANIPULATION OF SHARE PRICES, WHICH WILL HAVE DIRECT IMPACT ON THE INVESTOR COMMUNITY. DOES THE INDIAN STOCK MARKET REGULATOR DO ITS JOB? IT IS OBSERVED IN THE PAST ON VERY MANY OCCASIONS, THIS HAS NOT BEEN DONE PROPERLY AND ANY ACTION TAKEN BY THE REGULATOR IS ONLY AFTER THE INVESTOR IS HURT. THERE ARE LOT OF LIVE EXAMPLES FOR RIGGING THE SHARE PRICES BEYOND ANYBODY’S IMAGINATION TO BENEFIT A FEW PEOPLE, UNDER THE NOSE OF SEBI. THIS ALSO PLEASE TAKE UP.