It has failed to meet minimum solvency requirements stipulated by SEBI

The city is set to soon lose its biggest historical financial landmark, the Bangalore Stock Exchange (BgSE). The 50-year-old institution will shut down operations soon, leaving the Madras Stock Exchange as the only regional exchange in south India.

The immediate reason for the closure is the BgSE’s failure to meet the minimum solvency requirements stipulated by the Security and Exchange Board of India (SEBI).

Stipulation

The market regulator has stipulated that regional stock exchanges should have a minimum annual turnover of Rs. 1,000 crore, and a net worth of at least Rs. 100 crore. In contrast, the BgSE earned an income of just Rs. 5.45 crore in the last financial year. A BgSE shareholder told The Hindu that a general body meeting to approve the dissolution of the exchange was scheduled for September 21.

Lokkur V. Prabhakar, former president of the exchange, said the BgSE started plodding along after the advent of the much bigger National Stock Exchange (NSE) in the 1990s. “The NSE drew trading volumes away from the smaller exchanges, but the bigger blow came with the widespread use of online and screen-based trading,” Mr. Prabhakar said.

To retain a semblance of its relevance, and especially to protect the interests of its brokers, the BgSE floated a subsidiary, BgSE Financials, in the 1990s, which enabled brokers to act as sub-brokers of the Bombay Stock Exchange and the NSE.

“But in hindsight, with the bigger exchanges commanding such a big share of trading, this was futile,” observes Mr. Prabhakar. “It is the end of the road for small exchanges. Ludhiana, Delhi and Kolkata have all been shut,” he said.

In recent times, SEBI has given permission to stock exchanges in Hyderabad and Coimbatore to exit; and the exchange in Kochi has already filed for permission to exit.

Merger?

Mr. Prabhakar, who is managing director of Lokkur Stocks and Shares Pvt. Ltd., which was founded in 1935, said he and several others argued that the BgSE be merged with the NSE, but the majority did not agree. Asked what would be the fate of the BgSE, he said: “It may be merged with a financial institution.”