CSE seeks extension from Sebi

The exchange is mooting a plan to pick up a stake at a clearing corporation to stay afloat

The Calcutta Stock Exchange (CSE) has sought an extension of about eight to nine months from Securities and Exchange Board of India (Sebi) to meet the new norms on regional stock exchanges.

The Sebi deadline to meet the new norms for RSE expired on May 30th.

On May 28th, B Madhav Reddy, Managing Director and CEO of CSE met Sebi chief U K Sinha to seek an extension and apprise him of CSE's plans to operate as the single RSE in the country.

"We informed Sebi chief about CSE's plans to tie up with a clearing corporation, as well as consolidate the operations with other RSEs. The board has already approved the plans to pick up the stake. Now, we are awaiting Sebi's response," said Reddy.

According to sources, CSE is also mooting to pick up a stake at a clearing corporation to meet the Stock Exchanges and Clearing Corporations) Regulations, 2012.

In 2012, Sebi brought out new norms for RSEs, under which, they need to own a trading platform, with an annual trading of not less than than Rs 1,000 crore, to stay afloat. This apart, the net worth of the exchange should not be less than Rs 100 crore, said the norms. CSE was the only RSE to conform to the norms on trading platform and net worth, which impelled other RSEs to seek a tie-up with CSE. The exchange has its own trading platform called C-Star.However, CSE failed to meet the criterion set by the regulator of a tie-up with a recognized clearing corporation.

Earlier, CSE had formalised a deal with ICCL, the Clearing Corporation of BSE, which settles the trades of both BSE, to execute trades on C-Star. However, Sebi raised objections to the deal. The other option for CSE was to have its own clearing corporation, but this required a corpus of Rs 300 crore.

Thus, in April 2013, CSE had to suspend trading as it failed to comply with the Stock Exchanges and Clearing Corporations Regulations, 2012. So long, CSE was executing trade through its in-house clearing mechanism.

Subsequently, CSE had started talks with MCX-SX Clearing Corporation to meet the criterion.

Meanwhile, CSE has already signed agreements with fours regional exchanges-the Madhya Pradesh Stock Exchange, The Counter Exchange of India (OTCEI), Ludhiana and Bangalore Stock Exchanges to take over their operations.

Under the consolidation plan with the Madhya Pradesh Stock Exchange, CSE plans to absorb its brokers, companies and employees and of the exchange. In addition, CSE also plans to open an office at Indore. In case of OTCEI, it plans to acquire its companies and members. For Lundiana and Bangalore Stock Exchanges, the plan involves migration of their listed companies to CSE.

At present, at CSE, the daily turnover at BSE and NSE platforms is close to Rs 300 crore.

This apart, its annual turnover in C Star was close to Rs 1000 crore before April 2013. At present, there are close to 200 active brokers in CSE.

CSE was on the verge of extinction after being hit by one of the biggest scams in the history of stock markets in 2001.

However, the exchange got a fresh lease of life following demutualisation in 2007, when several entities, including BSE, picked up stakes in it.

Apart from BSE, there are 30 investors at CSE, including West Bengal Infrastructure Development Finance Corporation and several Kolkata-based private companies.