12 Indian Exchanges Could Disappear by Early 2011
March 8, 2010
Twelve regional exchanges in India face derecognition by early 2011, according to the Securities and Exchange Board of India, the country's Mumbai-based industry regulator.
These exchanges include the Guwahati Stock Exchange, the OTC Exchange of India, the Interconnected Stock Exchange of India Ltd. and the Vadodara Stock Exchange Ltd., all of which need to renew licenses.
Anshuman Jaswal, a Bangalore-based analyst with Boston-based research firm Celent LLC, told Securities Industry News that theoretically the licenses could be renewed.
But it could be very difficult given that many of these regional exchanges are practically defunct due to the lack of trading, he added. One reason: Failure to keep up with advances in technology.
SEBI was not available for comment at deadline.
Jaswal points out that this is amply demonstrated by the number of active brokers on these exchanges. For example, there are only 199 active brokers on the OTC Exchange, compared to the 1010 active on the Bombay Stock Exchange (BSE) as of the end of January this year.
"In a market dominated by the BSE and the National Stock Exchange (NSE), SEBI is trying to consolidate the exchanges through the derecogniton," he adds. "It is trying to rationalize the market to ensure proper regulation and prevent abuse."
According to Jaswal, this would make it even more difficult for others to renew their licenses.
But Munesh Goel, spokesman for the OTC Exchange, told Securities Industry News that the renewal will not be a problem for them.
"There is no such issue, we renew our license every year," he said, but declined to comment further.
SEBI has previously shut down four exchanges. Most recently, the the Coimbatore Stock Exchange Ltd. was closed in 2006 and Saurashtra Kutch Stock Exchange Ltd. in 2007, bringing the total number of recognized Indian exchanges down to 20.
According to Jaswal, bigger companies who were previously listed on the regional exchanges have already moved to the more tech-savvy national exchanges such as BSE and NSE, both of which offer direct market access and algorithmic trading.
"The extent of damage should be then, limited," he said.
