The 50-year-old institution is on the verge of closure
The fate of the 50-year-old Bangalore Stock Exchange (BgSE) will be determined at the annual general body meeting of shareholders on Saturday.
The exchange has a net worth of Rs. 110 crore, just 10 per cent higher than the minimum prescribed by the market regulator. “Meeting the minimum annual turnover of Rs. 1,000 crore prescribed by Securities and Exchange Board of India (SEBI) may not be difficult in itself, but that will not be enough to ensure the economic viability of the exchange,” said C. Subramaniam, Chief Operating Officer, BgSE.
Mr. Subramaniam asserted that the stoppage of its prime function of serving as an exchange was not because it is insolvent. “Our net worth is above the minimum level prescribed by SEBI and we can even sell some buildings and other assets to comply with the norms if necessary,” he said.
However, he admitted that the BgSE as a trading platform “may not be a viable business proposition.”
“At a formal level, the option of shutting down the exchange is only one of the options before the general body,” argued Mr. Subramaniam.
“The other option is to merge the exchange with another national level like-minded exchange,” he said.
Sources point out that the dominance of the large exchanges such as the National Stock Exchange and the Bombay Stock Exchange are so great that there is very little scope for smaller exchanges to make a dent. “Even the Multi Commodity Exchange has found it difficult to be viable 10 years after it was established,” said one sub-broker at the BgSE. “The game is up for the smaller regional exchanges,” he remarked.
Mr. Subramaniam pointed out that BgSE’s subsidiary, BgSE Financials, has a net worth of Rs. 16.7 crore and registered a turnover of Rs. 34,000 crore in 2012-13. Citing SEBI’s guidelines, he said, “Even if the parent [BgSE] is derecognised as an exchange, the subsidiary can continue as an independent broking entity.”
The BgSE has 925 shareholders who are eligible to attend Saturday’s meeting.