This view emerged at a meeting of Sebi and North Block officials earlier this month. While agreeing that smaller exchanges might fold up because of severe financial pressures, the finance ministry had insisted on a full set of protection measures for investors who were connected with these bourses.

One of the proposals put forward was to allow automatic migration of scrips which were solely listed on a small exchange to a larger exchange, like the National Stock Exchange or the Bombay Stock Exchange, in the event that the small exchange concerned folded up.

One of the suggestions was that the transfer should be carried out without the company incurring extra costs. The modality was expected to ensure that the interest ofthose who had invested in the scrip was fully protected by allowing for a parallel avenue of trading.

Since NSE had now spread its network all over the country and there were in existence inter-connected stock exchanges capable of serving investors in far flung areas, the closure of some of the small bourses did not necessarily mean that investors would be left in the lurch, the regulators argued.

Both the ministry and the Sebi had expressed themselves against any steps that would accelerate the closure process. For example, compulsory listing of scrips, as allowed under the law in the smaller bourses, will continue even if there was little or no trading in them.

Moreover, no delisting would be permitted in the smaller exchanges without requisite permissions under the law from investors themselves. For investors in small towns, the listing of a scrip in an exchange near to or in their area of residence had been an important factor that promoted a subscription.

Since the centres of listing weremandatorily mentioned in the offer document, delisting of such shares should not be permitted, the ministry had argued, even if there was little or no trading in them.