Bourse struggles to avoid closure

Sebi issues show-cause notice as to why the exchange should not be derecognised

As its plans for a merger with other regional stock exchanges didn’t materialise and its promoters failed to come up with a viable revival plan, Vadodara Stock Exchange is staring at de-recognition by the market regulator.

Recently, the Securities and Exchange Board of India (Sebi) issued a showcause notice to the exchange, questioning why it shouldn’t be de-recognised. VSE’s management has only about a month to come up with a revival plan to comply with Sebi’s minimum net worth criterion. Non-compliance may lead to the regulator taking stringent action, including suspending or de-recognising the exchange.

VSE sources said Sebi’s show-cause notice questioned the exchange’s operations and preparedness to revive the exchange.

“On March 23, a notice was issued to the exchange, questioning why the exchange should not be de-recognised,” said a senior exchange official. “Sebi has extended the deadline of submitting the revival plan by two months — from March 13 to May 13. They are supposed to convene a board meeting and an annual general meeting to pass and discuss the plan. But as far as VSE is concerned, nothing appears to be moving,” he added.

VSE Chairman Sameer Joshi said, “We have made all possible attempts to avoid closure. But so far, we have been unable to secure a breakthrough in coming up with a suitable revival plan. Sebi has been asking for a revival plan. But nothing has worked out yet.”

Though it is learnt the exchange is scouting for investors, lack of viable plan to achieve a turnover of Rs 1,000 crore, has failed to draw investors. “Nobody wants to see this exchange close. But achieving net worth of Rs 100 crore and turnover of Rs 1,000 crore is a complex task for a regional stock exchange,” said Joshi.

Last year, three regional stock exchanges in Gujarat — Ahmedabad Stock Exchange, Saurashtra and Kutch Stock Exchange and VSE — had decided to merge. However, as this did not materialise, VSE initiated talks with the Jignesh Shah-promoted MCX-Stock Exchange (MCX-SX) for a possible merger.

“We approached MCX-SX for a merger. But there was no response from them. Regional stock exchanges such as VSE are in a catch-22 situation---they aren’t able to meet the required norms and they do not want to be shut either,” Joshi said.

Earlier, in a notification on June 20, 2012, the securities market regulator had stated that all stock exchanges that failed to achieve net worth of Rs 100 crore and annual turnover of Rs 1,000 crore by the year 2015 would be de-recognised.