About 2,600 regional brokers default on fees

Sebi says regional stock exchanges can only exit after they clear outstanding dues

The unpaid dues of 2,591 regional exchange stock brokers are holding up the exit plans of at least 10 bourses. Seven other exchanges, which have not yet applied for an exit, also have dues. This brings the cumulative owed from regional exchanges to Rs 100 crore. The bourses whose exit is held up because of dues are Cochin, Bangalore, Ludhiana, Gauhati, Pune, Bhubaneswar, Madras, Delhi and Jaipur, in addition to the OTC Exchange of India. The seven exchanges that are yet to apply for an exit are bourses from Magadh, Vadodara, Ahmedabad and Kolkata, in addition to UP Stock Exchange, Madhya Pradesh Stock Exchange, and Inter-connected Stock Exchange of India.



The exchanges have expressed difficulty in recovering dues from their stock brokers, according to the minutes of the Securities and Exchange Board of India's board meeting last month. "Some of these stock exchanges have expressed their inability to comply. Some have also sought exemption from fee liability for certain categories of stock brokers who are not traceable," it said.

The regulator has so far reduced the outstanding by Rs.0.38 crore after representations from various exchanges.

It has further proposed that the outstanding fees be revised on the basis of a cut-off date based on factors such as the broker’s last trading date. It has also proposed concessions for brokers engaged in arbitrage activities. If there is a liability even after these concessions, then these are to be paid by the regional exchanges.



The proposal added that the exchange be allowed to exit even if it is not able to pay the remainder, provided that it gives an undertaking to pay within a specified period. Also, brokers with pending dues are not to be allowed a share from the exchange assets.

The regulator in 2012 had set minimum requirements for stock exchanges to continue functioning. Those who did not meet a networth criteria of Rs.100 crore and the average annual value of trades on whom did not at least reach Rs.1000 crore by May 2014 were to exit.

Four exchanges who exited have done so after paying off the outstanding dues themselves. These include Hyderabad Stock Exchange, Coimbatore Stock Exchange, Saurashtra and Kutch Stock Exchange and Mangalore Stock Exchange who had total outstanding liabilities of Rs.3.88 crore.