There may just be a ray of hope for some of the regional stock exchanges (RSEs) that struggle to stay afloat. The Securities & Exchange Board of India (Sebi) favours smaller regional bourses striking alliances with the two major national exchanges, the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE).
In line with this stance, the regulator recently granted permission to the Madras Stock Exchange to strike an alliance with NSE, whereby the members of MSE will be allowed to trade on the NSE platform. A similar arrangement has been struck between BSE and the Calcutta Stock Exchange, where BSE has picked up a 5% stake in the demutualised CSE and the members of CSE can now use the BSE trading platform.
Said a senior Sebi official: ?We are open to such alliances being struck between the smaller exchanges and the larger ones, if they help the smaller ones to do business and survive.?
The fate of RSEs has been the subject of intense debate over the last few years, ever since it became clear that NSE and BSE would dominate the country?s capital market. However, closing down the RSEs is still not being seen as an option by policymakers for a variety of reasons, among them the local sentiment; these RSEs still have many locally listed companies which would then be without a trading platform.
A Sebi panel, headed by former wholetime member G Anantharaman, had earlier recommended that RSEs be allowed to die their natural death.
However, RSEs had also hit upon another route for their members to stay in business. This was by setting up separate subsidiaries of the exchanges, which, in turn, would become members of the larger bourses. The members of RSEs would operate as sub-brokers of these subsidiaries.
This route has proved successful for some exchanges, among them Vadodara and Ahmedabad. Experts feel that while alliances between RSEs and the larger bourses would take care of brokers? interests, the regional and smaller companies listed on such exchanges can benefit if they are shifted to a separate exchange for small and medium enterprises (SMEs). Sebi is examining the possibility of setting up an exchange for SMEs and has kicked off the process by writing to industry associations.