Regional Exchanges Face Extinction As Volumes Peter Out

With volumes on regional stock exchanges (SEs) having already diminished substantially after the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE) extended their trading network nationwide, the rolling settlement regime coupled with the common settlement cycle may be the last nail in the coffin.

The effects are already being seen with turnovers on the Kolkata and Delhi stock exchanges, having fallen to Rs 222.74 cr and Rs 99.67 today from a volume of Rs 2049.07 cr and Rs 394.97 crore respectively on budget day.

Until a few weeks back, the regional exchanges especially in Kolkata and Delhi provided the much-needed facility for big-ticket operators and arbitrageurs to shift positions on the last day of the settlements of the NSE and the BSE.

But with the introduction of a common settlement cycle, which starts on Monday and ends on Friday across all exchanges, it would now no longer be possible to continue carrying on a trading position by shifting it from one exchange to another.

The natural fallout of this would also be the end to the arbitraging business. Arbitraging essentially involved buying of a particular scrip on the exchange where it is cheaper (i.e. towards the end of the settlement period) and correspondingly selling the same quantity of the same scrip on the exchange where the price is higher (i.e. towards the beginning of the settlement period).

But with the end of the arbitraging business, the core activity of these exchanges would which would in turn make them redundant.

M G Damani , chairman and managing director, Central Depository Services (India) Ltd, said