Inter-connected Stock Exchange of India - Causes of Decline of The Regional Stock Exchanges

Causes of Decline of The Regional Stock Exchanges

Abolition of Badla with effect from July 2, 2001, acted as the backbone of trading at the Calcutta, Delhi, Ahmedabad and Ludhiana Stock Exchange Association and also at a few other exchanges, which conducted Badla trading but in a clandestine manner, dealt a serious blow to trading at the RSEs. Introduction of uniform trading cycles at all the stock exchange, also effective from July 2, 2001, reduced further the volume of trading at the RSEs due to diminished opportunities for arbitrage transactions. Introduction of compulsory rolling settlements, initially in a few securities and subsequently in all securities effective from December 31, 2001 on a T+5 bases accelerated the reduction in turnover at the RSEs. The switch over of the rolling settlement to T+3 effective from April 1, 2002 and to T+2 with effect from April 1, 2003 sealed the fate of the RSEs. Yet another major reason for the absence of trading at the RSEs is that all the major operators are all these exchanges acquired memberships of either NSE or BSE or of both, while most others acquired the sub-brokerships of members of NSE/BSE and all of them switched over their operations completely to NSE and BSE. In spite of the fact that trading at the RSEs has ground to a halt, RSEs have managed to survive so far because of the annual listing fees that are being received from the listed companies. The circulars issued by the Ministry of Finance on April 23, 2003 withdrawing its earlier circulars which required all companies including existing listed companies, to be listed on the stock exchanges located in the State where the registered office or the main works/fixed assets of the company are situated, has led to the conclusion of RSEs as companies have started lining up one after the other to get themselves delisted from the RSEs.