After the Calcutta Stock Exchange (CSE) completed its demutualisation process last year, several entities, including the Bombay Stock Exchange, picked up stakes, coming to a total of 52 per cent, in the exchange. Subsequently, a new board of directors was appointed in December, chaired by Udayan Bose. A new management team is set to join to revamp the 100-year-old bourse and bring in people, money and profits, the chairman tells Pradeep Gooptu and Namrata Acharya. Excerpts from the interview:
What are the innovations the exchange is looking at?
Several, though there are some technical problems. CSE has its own C-Star trading platform but the potential is largely unutilised. A bigger issue is to get more brokers to trade on the bourse and get shares listed. In addition, the payment settlement system had failed in crucial areas such as margin calculation on big trades. The system went wrong in 2001, when the exchange went bankrupt.
The system has to be tested so that it doesn't go wrong again. Many brokers continue to face problems in the front-end, but the C-Star back-end is very strong. BSE had a similar problem. So, we are collaborating with BSE on this. By January or February next year, we should be able to resolve the problem. The immediate challenge is however to get members back to the trading ring. We are building a marketing team here for that. CSE does not need money - what it needs is more people trading, more listed companies, more entrepreneurs.
Are there any plans of starting commodity trading?
There are requests from brokers to start foreign currency and commodity trading. But, it is not viable at present.
Where does CSE stand in comparison with other exchanges?
Clearly, the BSE and NSE are the big players. Kolkata has its own trading platform, which Delhi and Madras do not have. In the 1970s and the 1980s, Kolkata was a bigger exchange than BSE. It still is technically advanced, but only 20 per cent of the platform is used. One weakness, I must admit, is that eastern India has very few companies that can be listed on the exchange.
So how do you bring the exchange back on track, if there are no companies to be listed?
There are some ways to do this. CSE does not need to go to big companies. If somebody wants to have an IPO for Rs 50 crore or Rs 100 crore, bigger exchanges is not an option. The volume generated on the BSe and NSE by traders from Kolkata is huge. The exchange can attract medium-sized companies or smaller ones looking to raise limited resources .
How has the CSE progressed after the demutualisation exercise?
There have been a lot of developments after that. Some problems were realted to 'legacy' issues. In 2001, there were defaults to the extent of about Rs 100 crore. Some money was garnered from guarantee funds of members, and some other members put in special contributions towards paying the defaults. However, the defaults were not settled or reconciled. These matters are still pending. There are about 90 cases in the courts.
Secondly, about 300 members were suspended by Sebi. In 2001, with 250 members not performing, there was no trade. However, in July this year, almost all restrictions on the suspended cases were cleared and they have got their licences back. The main problem remains the outstanding payments. The exchange has to determine how much the members owe CSE and how much some of them owe the others.
When the new board took over, the daily trading volume was Rs 1 crore. Now it has gone up to Rs 13 crore a day, that too in the present market conditions. By the end of December, our target is to have a daily volume of Rs 20 crore, and by the end of this financial year to Rs 25 crore.
Is there an possibility of any company picking up more stake in the exchange?
I don't think this will happen. CSE does not need money at this point of time. The exchange has about Rs 130-140 crore in the bank. Also, the board has five acres to sell on the Eastern Metropolitan Bypass. We will soon have a financial services complex at Rajarhat, 80 per cent of which can be rented. Thus fundamentally, CSE has financial viability. However, we can say the exchange needs to be more profitable, through increased income from trading commission, listing etc.