Regional Stock Exchanges (RSEs) in India have demanded relaxation of operational and shareholding norms to stay afloat. There are 16 RSEs in the country. Among these, Bangalore and Ahmedabad have chalked out merger plans with other exchanges. In a meeting held on Tuesday, the Securities and Exchange Board of India (Sebi) asked RSEs about their business plans before giving any assurance on relaxation of norms.
RSEs have expressed their concern over the five per cent cap on shareholding rule. They have sought relaxation of the Rs 100-crore net worth norm and the Rs 1,000-crore trading turnover criteria, among others.
Currently, only a few domestic institutions including banks, insurance companies and stock exchanges can hold up to 15 per cent in another exchange. However, there are several foreign players who are interested in supporting RSEs revive but have their apprehensions due to the five per cent cap on shareholding.
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“The five per cent cap on shareholding is a major roadblock for RSEs. There are institutions that want to provide stability to these exchanges and revive them. But putting 100 per cent efforts for a five per cent stake does not act as enough motivation,” said Sandeep Parekh, former Sebi official, who now runs FinSec Law Advisors.
Sebi has given three years to stock exchanges to meet the Rs 100-crore minimum net worth norm. Experts say, many RSEs will find it difficult to achieve this norm.
Stock exchanges that do not have any trading on its own platform or where annual trading is less than Rs 1,000 crore may apply for voluntary de-recognition and exit from business.
Except Calcutta, no other RSE has seen any trading on its platform for many years now. The Delhi Stock Exchange has the necessary permission from Sebi to launch operations and is expected to go live this year following the London Stock Exchange picking up five per cent stake in it and providing the exchange with trading technology.
The Ahmedabad Stock Exchange (ASE) has initiated a dialogue with two other Gujarat-based exchanges, Baroda Stock Exchange and Saurashtra Kutch Stock Exchange, for a possible merger of all three.
“Baroda and Saurashtra stock exchanges are welcome to merge with us. We are holding a meeting with them next week. We are planning to launch our own trading platform. For having Rs 100 crore net worth, we are planning to sell some of our assets,” Hemantsingh Jhala, chairman of ASE, said.
The Bangalore Stock Exchange is also scouting for a merger. Manjit Singh, executive director of the Bangalore Stock Exchange had said they were talking to the Interconnected Stock Exchange of India, the Madras Stock Exchange and the Calcutta Stock Exchange (CSE). With the kind of net worth required under the new regulations, it is not possible for any one stock exchange to survive. There is a need for amalgamation of at least two to three exchanges, Singh had told Business Standard.
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 Bombay Stock Exchange and National Stock Exchange (NSE). The Madras Stock Exchange has a tie-up with NSE. However, effectively defunct are the Inter-connected Stock Exchange and OTC Exchange of India.