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Calcutta stock exchange | Photo:PTI
Calcutta stock exchange | Photo:PTI

Calcutta Stock Exchange details survival strategies

The CSE is a hard case post Sebi’s directive to wind up CSE in May this year. Sandhya Sutodia finds out the ways of how CSE is ensuring its continued existence.
 

Kolkata: Earlier when shares were traded in the form of certificates, the regional exchanges had a role to play. But now when the shares can be traded in the demat form; the regional bourses have lost their relevance. The result is: the regional stock exchanges are winding up!

However, even today the Calcutta Stock Exchange (CSE), the oldest stock exchange in South Asia, is the only functional regional bourse out of 19 regional stock exchanges across the country.

This, after the market regulator- Securities and Exchange Board of India’s (Sebi) issued a directive to wind up CSE in the last week of May this year.

Will a stock ticker flashing the price of the traded stocks on the porch of the building at Lyons Range of the Calcutta Stock Exchange (CSE) continue to be the pride of the city in the days to come? CSE has not left any stone unturned to fight for its survival.

The exchange sought an extension of nine months for implementing the market regulator’s Securities and Exchange Board of India’s (Sebi’s) guidelines for regional stock exchanges which ended in May this year.

The question is can the ruling Trinamool revive the 105-years old exchange given that it found a mention in their manifesto? Though the government of West Bengal owns about a 4 per cent stake at CSE, can it save the oldest regional bourse which continues to exist even today.

In the meantime, CSE’s own platform, C-Star, has remained non-functional since April 2013. They have also informed the market regulator Sebi that they are undergoing consolidation and has already taken over five other regional exchanges.

“We have consolidated exchanges of Ludhiana, Bengaluru and Madhya Pradesh, Jaipur and OTC exchange of India (OTCEI),”

said B Madhav Reddy, managing director and chief executive officer, CSE.

When analysts were asked why the CSE is acquiring other regional stock exchanges, they said

“That’s the only bid for survival. The members of the defunct regional stock exchanges have long switched to other national exchanges like the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE).”

It may be noted that Sebi set up new norms for operation of regional stock exchanges.

The regional stock exchanges need to own a trading platform with an annual trading of not less than Rs 1,000 crore. And in effect to that, the CSE was unable to meet the turnover criteria of Rs 1,000 crore minimum trading in a year.

Moreover, the net worth of the exchange should not be less than Rs 100 crore, which the CSE fulfilled.

At a time when small regional bourses are looking for an exit route after not meeting the criteria put forth by Sebi, CSE plans to enlist all those listed companies of these exchanges which do not have their active trading platform since years by bringing them under its fold at a nominal cost.

“We are in talks with few stock exchanges,”

said Reddy.

Reddy further said that the Sebi had called a meeting to discuss the extension sought by the exchange but the response of the market regulator is still not known.Sources from Mumbai added that a meeting might be called and the chairman and MD may have to go and explain to Sebi about their revival plans.

The regional stock exchange is hopeful of its survival as it is awaiting the new norms for the clearing corporation which is in draft stage since the last  last two years, hinted Dipankar Chatterji, chairman, CSE.

However, he added, that the CSE has made arrangements with the clearing corporation of existing bourses like BSE and MCX-SX and as soon as it gets the nod from authorities, the exchange can easily achieve the targets set up by the Sebi.

In the meantime, analysts when asked if CSE will get the clearance to trade in its own platform , C-Star, they said,

“No…the regional stock exchange will simply close down. Even if it does, it won’t have the volume to sustain. Then it will have to wind down as regional exchanges mean nothing.”

People are talking about the increased number of retail participation in the stock market, but it cannot take place with a handful of big brokers opening up their branches in the country, said Reddy .

“Rather more platforms are needed and CSE can play an active role in ensuring the retail participation,”

he added.

CSE is also going through the process of sale of land asset and it has appointed a consultant for this. After selling the asset, it aims to raise Rs 250 crore-Rs 300 crore, which it plans to plough back for running of the exchange.

Over the last 3-4 years, the exchange has not only earmarked a huge amount on updating the IT and infrastructure but has also introduced a website in Bengali and tied-up with the United Bank of India (UBI) for offering online equity trading facility to the bank customers.

Will the sale of land be utilised to buy a stake in a clearing corporation, a major hurdle for the local bourse to stay operational as an independent exchange? Only the market regulator can save the exchange!

“CSE is a hard case because of Sebi orders as the regulator gave a directive to wind up CSE. Maximum trades are done on NSE, being the premier exchange rate. Hence, Sebi would take a call about CSE,”

said Vinod K Jhaveri, CEO, VKJ Advisory, from Vadodara.

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