Last calls

Calcutta Stock Exchange submits to multiple illnesses

As things stand, the once-strategic Calcutta Stock Exchange (CSE) may be finally buried at the end of the month, by when the Securities and Exchange Board of India or Sebi, the capital market regulator, has asked several regional stock exchanges to close down. The exchange, which is asset-rich, may keep arguing with Sebi for some time — but the reality is that time has overtaken it in more ways than one. Since last April it has not been allowed to conduct trades on its own as it does not have a tie-up with an independent clearing corporation. The brokers linked to it have been conducting business through the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE). Current daily trading volumes through this route are around Rs 300 crore, down from Rs 700 crore in the late 1990s. The big fall came in 2001 when there was a payments crisis in tandem with the collapse of the bull operator Ketan Parekh, leading to a default in badla payments by 70 brokers. They were helping the bull operator cover his positions on BSE by taking advantage of the lax margins requirements at CSE.

While CSE may have been found terminally ill in 2001, the decline of one of South Asia’s oldest stock exchanges began in the early 1990s with the initiation of what is ironically called “terminalisation” by NSE. With it the days of “open outcry” on a trading floor were driven out by computer terminals. The growth hormones switched off for CSE even earlier with the decline of Calcutta (as it was called then) well on the way from the 1960s. Stock exchanges are driven by the blue chips which dominate them and if there is one company which symbolises the decline of CSE, then it is the once respected Hindustan Motors, maker of Ambassador cars. CSE also dug its own grave by the way it operated. Well before the vital signs started showing up, leading brokers became dependent on BSE, beginning their day with queries over what was on the Mumbai brokers’ minds. Besides, the CSE big names were very close to individual promoters and traded heavily in their shares. Insider trading charges were frequent. In the age of mutualisation, when leading brokers effectively ran CSE, governance standards were poor. Demutualisation came in 2007 but that was too late.

Today, all that remains is nostalgia and anecdotes, many of them centring around a legendary bear operator. Every time there was a bull run he would go short, offering the crucial counterparty in whose absence the bulls would run amok. Then when the market would crash, the bulls would be queuing up before him for a reasonable settlement. In the process the big bear created supply and liquidity and acted like a shock absorber. The bigger part of the market, which officially traded for only two hours at midday, was the unofficial kerb trading which literally spilled over onto the streets around the imposing heritage Lyons Range building.

People paid a fortune to get a standing slot just outside of the main gate and a lot of trades were recorded on bits of paper rested on car bonnets. Your word was your bond and no one reneged. Sometimes, it was not even a spoken word but gestures, a great hand signal system that transmitted what was happening within the black box (on the exchange floor) to the world just outside. What will perhaps be missed most is the incomparable street food that thrived around the bourse. If you wanted the best masala chai, kachori and assorted bhujia in town you knew where to go.