The members are also understood to have opposed the 3:1 swap ratio which was proposed for the merger with the Ludhiana Stock Exchange after a valuation of the net worth of the two stock exchanges.

The market value of a DSE membership card is Rs 30 lakh and that of LSE is around Rs 4 lakh whereas the book value of DSE is Rs 12 lakh while that of Ludhiana is Rs 17-18 lakh.

Sources said DSE was not being offered anything substantial than the Ludhiana Stock Exchange building in the proposed merger. The idea of the merger was initiated by LSE administration which had also got the clearance from Securities and Exchange Board of India(SEBI), they added.

The DSE-LSE merger had got the tacit approval from SEBI. SEBI chief DR Mehta had said the market regulator was willing to give the go-ahead to the merger if it was in the best interest of both the exchanges. As per the law, the two bourses would also have required approval of the relevant high courts, and their respective board of directors for the proposed merger.

"DSE never approached the Delhi High Court for any formal approval. The board of directors also did not take up the issue", said a source.

The merger move was part of DSE's efforts to take on the competition posed by the Bombay Stock Exchange and National Stock Exchange by extending its trading terminals outside Delhi.

By merging with LSE, it was being thought that DSE would get expertise and larger area of operations whereas for Ludhiana it would have meant getting attached to a larger stock exchange with more liquidity and volume.

With 380-odd members on its ranks, DSE has an average daily turnover of over Rs 300crore. LSE has 300 members and an average daily turnover of about Rs 5 crore. DSE has already initiated efforts to go national and compete with both BSE and NSE by opening DOTS terminals outside Delhi. The stock exchange has got SEBI approval for on-line trading outside Delhi in over 70 cities.

INSIGHT

For marginal stock exchanges such as Ludhiana, Jaipur and Kanpur their future existence is in question. With the attraction of trading on a competitive exchange such as the NSE few investors would prefer to trade on the smaller one-town exchanges, which is why SEs like the Bombay Stock Exchange and the Delhi Stock Exchange decided to expand into other towns as well. It is only inevitable that marginal exchanges such as Ludhiana, Kanpur and others will have to down shutters one day. Even today many of these exchanges do not operate on all days for want of orders.