Five regional stock exchanges stop functioning

It may be recalled that regional stock exchanges had floated another exchange — Inter-connected Stock Exchange — in bid to stay afloat and face competition. But things have gone from bad to worse for regional exchanges. On the other hand, NSE and the BSE have set up terminals in most of the towns in the country.

It has also stated that the seven regional SEs closed down and those which have inactive members ratio of over 50 per cent include: Coimbatore Stock Exchange (66.29 per cent), Ludhiana Stock Exchange (50.17 per cent), Vadodra Stock Exchange (77.20 per cent), Cochin Stock Exchange (77.36 per cent), Uttar Pradesh Stock Exchange (57.60 per cent), Madras Stock Exchange (78.11 per cent) and Calcutta Stock Exchange (52.62 per cent).

The percentage of inactive brokers (whose annual turnover is less than Rs 1 crore) of these exchanges has risen to more than 90 per cent. Out of the remaining 14 SEs, only six account for over 97 per cent of the annual turnover of Rs 20,00,000 crore in the country. This information was given by the BSE Brokers’ Forum to the Supreme Court in a rejoinder filed by it in a 1993-case related to the registration fee proposed to be imposed by the Securities and Exchange Board of India (Sebi).

Sebi in its submission stated to the apex court that brokers of small exchanges play a very important role as they make the capital markets accessible to small investors from different parts of the country. BBF, while challenging the market regulator’s contention, stated that many of the SEs have virtually closed down with no active members and only six stock exchanges accounting for 97 per cent of the turnover.

Citing the reasons for closing down of the operations, BBF submitted that these exchanges were unable to bear the crushing burden of expenditure that the electronic trading platform mandated by Sebi entailed. Installation and maintenance of an electronic trading system requires a minimum level of trading volume, which the smaller exchanges never had or have, it said.

Sebi has contended that, among other things, it requires more funds as it also has to regulate more than 8,000 brokers spread all over the country along with other market intermediaries. However, BBF has challenged this view and submitted that number of active brokers in the country have actually plummeted during last few years. Sebi’s own figures of brokers with a turnover below Rs 1 crore annually have risen from 774 in 1991-92 to 4,131 in 1999-2000. BBF has submitted that majority of these brokers have shut down their business. In fact, even on BSE, out of total 670 brokers, 134 are inactive with zero turnover.

The National Stock Exchange (NSE) tops the list with least inactive member ratio of only 5.79 per cent. BSE comes at number two with a ratio of 20.75 per cent, while Delhi Stock Exchange takes the third place with 25 per cent of it’s total 372 members remaining inactive. Banglore Stock Exchange has an inactive member ratio of 27.31 per cent (total members 238), Ahemdabad Stock Exchange is ranked fifth as it’s inactive member ratio is at 30.63 per cent (total members 333) and out of 280 members of Hyedrabad Stock Exchange 130 are inactive taking the ratio of inactive members to 46.43 per cent.

In all, there are 8,337 clearing members (brokers) in 21 stock exchanges of which 3,499 brokers are active and 4,838 are inactive taking the total inactive members ratio to 58.03 per cent.