Bhubaneswar, Calcutta stock exchanges may merge

Bhubaneswar Stock Exchange is in advanced stages of talks for a possible merger with Calcutta Stock Exchange (CSE).

In April 2012, the Securities and Exchange Board of India (Sebi) had said an exchange without any trading platform or one with annual trading of less than Rs 1,000 crore should apply for voluntary de-recognition and exit. It had given exchanges three years to meet the net worth criterion of at least Rs 100 crore each.

CSE, in which BSE has a stake of five per cent, is the only regional exchange to be compliant with the new rule. “The board has taken the in-principal decision for a consolidation or merger. So far, CSE is the only possibility we have exploited, as it is an eastern region-based exchange and meets the Sebi criteria,” said Debraj Biswal, chief executive, Bhubaneswar Stock Exchange.

CSE, which works on the C-Star trading platform, has about 750 brokers, while Bhubaneswar Stock Exchange has about 100 brokers.

About 6,000 companies are listed on regional exchanges.

“We are in advanced stages of discussions with Bhubaneswar Stock Exchange for consolidation. We are also in talks with other regional stock exchanges — those at Ludhiana and Pune,” said B Madhav Reddy, managing director and chief executive, CSE. The exchange has invited companies and members of other exchanges for free migration to its platform.

To meet the Sebi criterion, Madras Stock Exchange had earlier proposed setting up its own trading platform. To stay afloat, almost all regional exchanges have adopted the subsidiary route, under which a regional exchange floats a subsidiary or an entity formed by its members that acquires membership of a national exchange. Ties with the national exchanges — the National Stock Exchange (NSE) and the BSE — through subsidiaries have, to a large extent, rendered the idea of individual trading platforms redundant.

Sebi had said trading members of a de-recognised exchange would continue to avail of trading opportunities through an existing subsidiary, which would function as a broking entity of a national exchange.

Regional stock exchanges have been struggling for several years. Revival plans have failed due to factors such as legacy issues and the interference of brokers in day-to-day operations, which lead to management-level exits.