Broking arms of regional stock exchanges struggle to keep up volumes

Even as Gujarat remains among the top states in terms of investors' participation in equity markets, the broking subsidiaries of the three regional stock exchanges (RSEs) in the state are struggling to maintain volumes.

The broking subsidiaries of the three RSEs -" Ahmedabad Stock Exchange (ASE), Vadodara Stock Exchange (VSE) and Saurashtra-Kutch Stock Exchange (SKSE) -" have witnessed their average daily volumes tumbling to one of the lowest in recent years.

According to exchange sources, the average daily volumes of ASE's broking subsidiary, ASE Capital Markets, has fallen from Rs 100 crore last year to Rs 50 crore. With SKSE Securities, the broking subsidiary of SKSE, daily turnover is a meagre Rs 25-30 crore against Rs 70 crore two years earlier.

VSE's subsidiary, VSE Stock Services Limited (VSSL), witnessed daily turnover falling from Rs 100 crore in 2008-09 to around Rs 50 crore last year. According to VSSL officials, the average daily turnover is now Rs 20 crore.

"Small investors are not coming for trading nowadays as markets are not that attractive as a few years back. Also, many of the broker members of these subsidiaries have shifted to other businesses due to uncertainty of equity markets," said K K Mishra, managing director, ASE.

The exchanges currently offer future and options (F&O), cash and debt investments. "Most of our volumes get generated from F&O in the National Stock Exchange, while volumes in cash segment are less," said an official of VSE.

"The future looks grim for the subsidiaries, unless they come up with interesting products for the traders and investors. Also, retail participation needs to be increased for much better volumes," said Chirag Dedakia, general manager, SKSE.

According to traders, the introduction of the new national equity exchange, MCX-SX, will bring less hope for revival in volumes of these broking subsidiaries of RSEs.

"Setting up of broking subsidiaries was a broker rescue model. This was made to provide a platform to brokers in the RSEs to earn. However, it (subsidiary companies) cannot be seen as an exchange rescue model, because revival of an exchange cannot happen through revival in subsidiaries," added Mishra.

The subsidiary of ASE has around 191 broker-members, of which 141 are active, while SKSE's arm has 60 active members. VSE's subsidiary has 100 members.