Sebi spells out exit route for regional exchanges

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The Securities and Exchange Board of India (Sebi) on Monday paved the way for closure of several defunct regional stock exchanges (RSEs) by allowing voluntary exits.

An exchange without any trading at its own platform or where the annual trading is less than Rs 1,000 crore may apply for voluntary derecognition and exit, Sebi said in a statement after its board meeting.

“If the stock exchange eligible for voluntary derecognition...does not apply for (this) and exit within a period of two years from the date of notification, Sebi shall proceed with compulsory derecognition and exit of such (an) exchange,” Sebi said.

EXIT ROUTE FOR DEFUNCT STOCK EXCHANGES

• A stock exchange without any trading at its own platform or where the annual trading is less than Rs 1,000 crore may apply for voluntary de-recognition and exit
• The mechanism of the dissemination board at the exchange is decided on the lines of the bulletin board with regard to an exit option to shareholders of exclusively-listed companies
• Trading members of the de-recognised exchange will continue to avail of trading opportunities through its existing subsidiary company, which will function as a normal broking entity of a national exchange, such as BSE and NSE

There are 16 Sebi-recognised RSEs in India, including the Ahmedabad Stock Exchange, Bangalore Stock Exchange, Calcutta Stock Exchange (CSE) and Delhi Stock Exchange. There is hardly any trading on any RSEs. Also, effectively defunct are the Inter-connected Stock Exchange and OTC Exchange of India.

After the new norms, almost all RSEs will have to tie up with either the Bombay Stock Exchange (BSE) or the National Stock Exchange (NSE) under Section 13 of the Securities Contract Regulation Act, if they want to survive, a senior official at one of the RSEs said.

An agreement under Section 13 allows companies listed on an RSE to be traded on a national stock exchange and also permits its members to trade in shares of companies listed on a national exchange.

The Madhya Pradesh Stock Exchange and CSE have tied up with both BSE and NSE. The Madras Stock Exchange has a tie-up with NSE.

Sebi has also given three years to stock exchanges to meet a minimum net worth of Rs 100 crore, an increased requirement. This, experts say, a lot of RSEs will find difficult to achieve.

On treatment of assets of derecognised exchanges, the Sebi board decided on certain conditions such as payment of statutory dues to Sebi/government and contribution of a certain percentage of the assets towards the Investor Protection and Education Fund.

Trading members of the derecognised exchange may continue to avail trading opportunities through its existing subsidiary company which will function as a normal broking entity at those exchanges having nationwide trading terminals.