Metropolitan brokers still awaiting refund of membership deposits

Several brokers who had enrolled during the exchange's membership drive in January 2013 are surrendering their membership licences

Close to 300 broker-members are still waiting to get refunds of their membership deposits from the Metropolitan Stock Exchange (formerly MCX-SX).

With the three-year membership period of these brokers coming to an end in February-March this year, the exchange was supposed to give refunds of Rs 10-12 lakh to each. Several brokers who had enrolled during its membership drive in January 2013 are in the process of surrendering their membership licences.

“Since the exchange has not seen traction, a large number of broker members are keen to get their deposits back and have been anxiously waiting for this,” said Alok Churiwala, vice-chairman, BSE Brokers Forum.

To give refunds, the exchange is first required to apply to the Securities and Exchange Board of India (Sebi) for cancellation of registration certificate, said experts. This process can take up to two months.

“Brokers have suggested that the members’ deposits be kept in an escrow account to safeguard their interest in view of the falling revenue of the exchange. This has been communicated to the market regulator,” said a broker, on condition of anonymity.

In an e-mail response to this newspaper, the exchange said it maintained adequate funds towards members’ deposits at all times. “We have more than 900 members and keep getting requests for surrender and new memberships in the normal course of business. The exchange has received some surrender applications which are being processed and post Sebi approval, deposits are being refunded,” said a Metropolitan spokesperson.

The spokesperson said it was incorrect to state members were waiting for long to get their refunds, as there is a clear process outlined by the regulator and exchange bylaws which needs to be adhered to. “On the contrary, MSEI has undertaken a branding exercise to improve visibility among market participants to encourage and attract new membership and trading volumes. We have embarked upon a revamped engagement plan with all stakeholders, including members, regulators, investors and market participants, to showcase the new business plan.”

However, at present, the exchange seems to be grappling with tough business conditions and low cash reserves, and brokers have not been able to do significant trades in the equity segment. The average monthly cash volumes have been between Rs 11 lakh and Rs 5.5 crore in the past year. In contrast, the other two national exchanges have seen far higher volumes – BSE has seen average monthly volumes of Rs 3,000 crore and the National Stock Exchange has clocked Rs 15,000 crore.

For the nine months ended December 2015, Metropolitan posted a net loss of Rs 38 crore, compared with a net loss of Rs 49 crore in the same period of the previous year.