Financial Daily from THE HINDU group of publications
Monday, Apr 07, 2003
Financial Daily from THE HINDU group of publications Monday, Apr 07, 2003 |
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Stock Exchanges Government - Policy A knockout punch for regional stock exchanges — Mandatory listing policy to be scrapped
Sarbajeet K Sen
NEW DELHI, April 6 IN what could deal a lethal blow to several smaller stock exchanges in the country, the Ministry of Finance has decided to scrap the policy on mandatory listing by companies in the regional stock exchange where the registered office of the company is located. The move could result in the eventual complete fading out of stock exchanges which are currently surviving on the listing fees that they get on account of compulsion on companies registered in the capital to list on the exchange because of the policy on mandatory listing. "We have taken a decision to withdraw the policy on compulsory listing," a top official of the Ministry of Finance said. He said that once the circular giving effect to the policy is withdrawn the listing requirements of companies having public holding would be taken care of by the Central Listing Authority. "The Central Listing Authority (CLA) is in the process of being operationalised. That would decide on the listing requirements of companies," the official said. The Securities and Exchange Board of India (SEBI) has already issued regulations for making the CLA functional. The official admitted that there could be opposition from the regional stock exchanges on the decision on withdrawing the policy since a large portion of their finances for day-to-day operations have been coming from the listing fees. "There would be complaints by stock exchanges that they would have to face financial difficulty on account of the withdrawal of the policy. However, we feel that the move is another much-needed step in streamlining the operations of the capital market in the country," he said. The decision to withdraw the mandatory listing requirement comes in the wake of larger corporates pointing out to the Government and SEBI that this was leading to unnecessary expenditure. They said that the benefits derived from listing at the regional exchanges are not in any way commensurate with the amount of fees that they are forking out. Moreover, in some stock exchanges there have been negligible or even zero trading. A case in point again is the Delhi Stock Exchange where though trading has come to a virtual standstill from quite some time now, companies listed on it continue to pay the listing fees. In fact, the lion share of trading in equities and other listed instruments are routed through the two major stock exchanges - the Bombay Stock Exchange (BSE) and the National Stock Exchange, with only a few other exchanges such as the one in Kolkata registering a decent daily turnover. The scrapping of the circular on mandatory listing can be seen as a fall-out of the report of the SEBI-appointed panel under Justice M H Kania which had recommended that the concept of regional stock exchanges be dispensed with altogether.
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