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  • Loosing Its Equity: By-Somesh Nayak

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    Regional stock exchanges (RSEs) in India were established to develop capital markets and regional economies but have become largely defunct. There were originally 23 RSEs but some have been deregistered. Transaction volumes at RSEs peaked in the 1990s but have declined to almost nothing in the past decade as the National Stock Exchange has dominated the market. Attempts to revive RSEs through corporatization and allowing foreign investment were unsuccessful due to regulations capping individual shareholding at 5%, limiting foreign investment. RSEs may still provide some value by allowing cheaper access to the Bombay Stock Exchange and National Stock Exchange for new brokers through subsidiaries.

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    Regional stock exchanges (RSEs) in India were established to develop capital markets and regional economies but have become largely defunct. There were originally 23 RSEs but some have been deregistered. Transaction volumes at RSEs peaked in the 1990s but have declined to almost nothing in the past decade as the National Stock Exchange has dominated the market. Attempts to revive RSEs through corporatization and allowing foreign investment were unsuccessful due to regulations capping individual shareholding at 5%, limiting foreign investment. RSEs may still provide some value by allowing cheaper access to the Bombay Stock Exchange and National Stock Exchange for new brokers through subsidiaries.

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    7 views11 pages

    Loosing Its Equity: By-Somesh Nayak

    Uploaded by

    m_lohani
    Regional stock exchanges (RSEs) in India were established to develop capital markets and regional economies but have become largely defunct. There were originally 23 RSEs but some have been deregistered. Transaction volumes at RSEs peaked in the 1990s but have declined to almost nothing in the past decade as the National Stock Exchange has dominated the market. Attempts to revive RSEs through corporatization and allowing foreign investment were unsuccessful due to regulations capping individual shareholding at 5%, limiting foreign investment. RSEs may still provide some value by allowing cheaper access to the Bombay Stock Exchange and National Stock Exchange for new brokers through subsidiaries.

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    of 11

    LOOSING ITS EQUITY

    By- Somesh Nayak


    Roll no-20110122

    RSEs And Its ROLES

    RSEs
    The RSEs were set up with the idea of developing capital markets and forming a vital link to the economy. They were supposed to play a major role in regional development. In their hey days the RSEs accounted for nearly 60 per cent of the total turnover in the country. The Bombay Stock Exchange (BSE) accounted for the rest.

    In 1993-94 RSEs recorded a turnover of Rs 2.10 lakh crore. But, over the years, they have become defunct. There are 23 RSEs in the country (Mangalore, Hyderabad, Magadh, Saurashtra, Coimbatore and Meerut stock exchanges have been derecognised by the regulator)

    but except for the BSE, not a single share transaction has taken place at an RSE for nearly a decade. The rise and rise of the National Stock Exchange (NSE) started in 1994 has made most of them irrelevant.

    What Went Wrong?


    A few years ago, corporatisation and demutualisation was allowed in the RSEs. It was hoped that new investors will come in with exciting business plans and new technology to revive and develop them.

    The prime reason for this being the governments decision to cap individual shareholding at 5 per cent. This is one of the reasons why our talks with the Korean (Stock) Exchange failed. A foreign exchange can only invest 5 per cent. No exchange will come for minority holding and give away their technology.

    what does the future hold for the RSEs?


    The subsidiaries of the RSEs enable broker members to trade on the BSE and the NSE at one-tenth the cost. Becoming a member of the BSE or the NSE normally costs between Rs 20 lakh and Rs 1 crore in fees. However, if you come through the RSE, you can start trading on the BSE or the NSE at Rs 9-10 lakh. All you have to do is become a broker member of the RSE and via its subsidiary you become a subbroker and can trade on the NSE and the BSE.

    You can trade from Mumbai even after becoming a member of BgSE as today everything is online. In the past two years, we have got 16 new members.

    Thank You

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