MoF differs with delisting panel

Regional stock exchanges have been able to build up a traded list of securities mostly on the basis of the compulsory listing clause, it is argued. It is mandatory for all corporates, which have issued shares to the public, to list their shares in the major stock exchange in the region where it is registered. Regional stock exchanges gain by way of listing fees and by the fact that the public can conduct transactions in the listed share through the exchange.

The ministry is of the view that trading volumes in regional stock exchanges will see a dramatic downturn if compulsory listing is done away with. Of the 23 SEBI registered exchanges in India, seven – NSE, Mumbai, Calcutta, Delhi, Ahmedabad, U.P. and Pune – account for 96 per cent of the total trading volume in the country in 1996-97. NSE tops the list with a 46 per cent share, followed by Bombay stock exchange which accounts for another 19 per cent. The argument is that smaller stock exchanges are already facing the squeeze, because of the strategic shift in trading patterns in favour of the larger stock exchanges.

Unless adequate steps are taken to prop up regional stock exchanges, either by improving their trading hardware or by networking them with the larger ones, a move to do away with compulsory listing will do a lot of damage.

More so, as trading technology is getting more complex and investors tending to gravitate to the larger exchanges because of better rates and higher liquidity. What is more, having once empowered them with provisions of compulsory listing, any attempt to reverse the decision will create a crisis of confidence and many of them will be left with no option but to fold up. Already, some of the regional exchanges have evidenced negative growth in trading volumes in 1996-97. The Hyderabad stock exchange, for example, saw a 62 per cent fall in volumes over 1995-96.