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The survival of Calcutta Stock Exchange (CSE) now hinges on the disposal of a three-acre piece of land situated at Eastern Metropolitan bypass in Kolkata. Of the 21 regional stock exchanges, 20 have been either closed down or are in the process of winding up.
On May 26, 2014, CSE received SEBI nod for the sale, and shareholders approval on June 20, 2014.
The sale proceeds (about ₹300 crore) will help the exchange invest in a clearing corporation (CC) in accordance with SEBI norms.
‘Fighting for survival’Suresh Kaushik, ex-Director, CSE and Vice-Chairman, Federation of Indian Stock Exchanges, said, “We are fighting for survival; else the crores of rupees spent on the electronic trading platform, livelihoods/ investments would be lost.”
SEBI requires a net worth of ₹100 crore and a minimum of ₹1,000 crore annual turnover for stock exchanges to function. CSE was compliant on both counts until FY13.
A SEBI letter dated April 3, 2013, directed CSE to discontinue clearing and settlement of trades executed on its C-STAR trading system through its clearing house beyond April 5, 2013, till it established a CC in compliance with the SECC Regulations, 2012. With this order, turnover on the CSE fell to ₹159 crore during the April-December 2013 period, down sharply from ₹4,614 crore in FY13.
Another SEBI letter dated May 21, 2014, informed CSE about its intent to proceed with compulsory de-recognition and exit from stock exchange operations since it had not been able to achieve the prescribed turnover of ₹1,000 crore on continuous basis and had not applied for voluntary surrender.
CSE’s agreement with the BSE’s clearing corporation Indian Clearing Corporation (ICCL) on June 18, 2013, could not fructify as SEBI clarified that the role of a clearing corporation was the same — whether set up or tied up, implying that it has to bring in resources.
Tejesh Chitlangi, Partner IC Legal, said, “since the efforts being made by some of the regional exchanges to go to court for relief were turned down, the expectation for CSE was to seek respite from the Finance Ministry in the form of a relaxation in the Stock Exchange and Clearing Corporation Regulations or from SEBI, which can relax the requirement or provide more time to comply with the same.
“Since SEBI’s objective is to protect the interests of investors in the securities market, it would like to avoid the listed companies going to the Dissemination Board and hence not providing a fair price to shareholders. This all has resulted in a catch-22 situation for both the CSE and SEBI as neither the exchange wants to get out of business nor SEBI is forcing it to exit despite theexchange being non-compliant, keeping in view investor protection.”
Today, CSE is providing BSE/NSE access to its brokers under Section 13 of the Securities Contract (Regulation) Act, 1956. Close to 200 brokers are doing an average daily turnover of ₹25-30 crore in the capital market segment besides another ₹100 crore in the derivatives segment.
As on date CSE is compliant on one count — net worth of ₹100 crore. However, the jury is still out on whether the exchange will survive.
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