The Madras Stock Exchange, the first to be set up in South India, may stop operations shortly. The 76-year-old exchange has failed to secure a formal tie-up with the National Securities Clearing Corporation Ltd (NSCCL), a subsidiary of the NSE, and achieve the net worth target, and hence may soon cease to be a trading interface for investors.

Though MSE had enabled trading of its shares on the NSE platform as a permitted security through a Memorandum of Understanding with the NSE, executed in 2009, a formal agreement with its subsidiary never came through.

Sixty companies are currently trading on the NSE platform through this tie-up, which could come to an end if MSE applies for de-recognition as a stock exchange. The trading turnover of NSE-listed companies from MSE was a little over ₹5,000 crore in 2012-13.

SEBI mandate The Securities and Exchange Board of India had mandated in June 2012 that stock exchanges should have an annual trading turnover of ₹1,000 crore on their own platform and have a net worth of ₹100 crore. MSE, a source said, would be able to meet the turnover target but not the net worth requirement.

In its communications to the MSE, SEBI has said the stock exchange does not have adequate surveillance mechanisms to handle large volumes of trade, according to a source.

A highly placed source in the MSE told Business Line that a board meeting is likely to be scheduled next week to consider exit options.

Another source associated with the exchange, on a condition of anonymity, said two meetings, one with trading members and another with shareholders were held in April to apprise them of the crisis.

“About 200 trading members are currently attached to the MSE, and their livelihood will get affected by this move,” said the source.

The stock exchange profit declined sharply to ₹4.33 crore for 2012-13 against ₹35.21 crore in 2011-12.

The process of de-recognition takes time. Mangalore Stock Exchange, which was denied a renewal by SEBI in 2004, was given the exit order last month, while Coimbatore Stock Exchange’s exit order was delivered last year.

Companies such as United Nilgiris Tea Estates Ltd and Amrutanjan Health Care Ltd got on to the NSE platform through their listing on the MSE, but the other 250-300 smaller companies have missed the opportunity, said the source.

According to SEBI guidelines, a company listed solely on the exchange that is bound for exit will find a place on other recognised stock exchanges.

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