Establishment of Inter-connected Stock Exchange
It was the dwindling fortunes of RSEs that brought them together to establish the Inter-connected Stock Exchange of India Ltd. (ISE). At a meeting of the Federation of Indian Stock Exchanges held in October 1996, a Steering Committee was formed to evolve an Inter-Connected Market System. As a result, ISE, which was promoted by 14 regional stock exchanges of the country (excluding Calcutta, Delhi, Ahmedabad, Ludhiana and Pune Stock Exchange, apart from NSE, BSE and OTCEI) was incorporated on ISE by SEBI under the Securities Contracts (Regulations) Act, 1956 on November 18, 1998, ISE commenced trading on February 26, 1999. ISE was launched with an objective of converting small, fragmented and illiquid markets into large, liquid national-level markets. This was a unique experiment, with a highly automated trading, clearing and settlement systems backed by state-of-the-art computers. ISE is also a professionally managed stock exchange with the Chairman of the Exchange being also a Public Representative Director from its inception. Unfortunately for the RSEs, particularly small brokers, the ISE experiment did not succeed. The daily turnover, which used to be Rs. 1 to 2 crore in the first six months, gradually declined to virtually zero level. Failure of ISE was, due to the bigger brokers of the participating RSEs failing to support any interest in trading on ISE due to commercial considerations. As a result, it becomes virtually impossible for ISE to create any worthwhile liquidity in its markets in competition with the breadth and depth of NSE and BSE. Markers continued to be fragmented as the participating RSEs did not close down their regional segments. All the while the small fragmented and illiquid market failed to emerge. ISE has also not succeeded in getting companies listed on it despite the stipulation by SEBI that the State of Maharashtra constituted the regional area for ISE due to lack of regulatory support for making it applicable to over 3,000 already listed companies in the State of Maharashtra.
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