The Hindu Business Line : Bourses set for shake-out phase

An advance notice was served last year when the Government announced an one-time capital gains tax waiver for converting the exchanges run on a not for profit basis into demutualised entities.

With Mr Yashwant Sinha serving notice in his Budget today about the intention to complete the process of demutualisation and corporatisation of stock exchanges during this year, a shake-out is well and truly imminent.

Having seen the writing on the wall, the Bombay Stock Exchange started the process last year. The Delhi bourse has quickly chosen to holds hands with BSE, but several other exchanges have refused to take the cue.

With 24 stock exchanges dotting the country, there have been calls for a voluntary retirement scheme (VRS) for a large number of stock exchanges.

Particularly so when there has been a significant spread of trading terminals across the country, leaving a majority of the exchanges bleeding except the bigger exchanges such as the National Stock Exchange, the Bombay Stock Exchange, and the bourses in Ahmedabad, Kolkata and Chennai.

The irrelevant nature of these regional exchanges is reflected in the cold figures.

A dozen exchanges reported nil turnover in 2001 and another half a dozen would be in a similar situation shortly, according to the Economic Advisor of NSE, Mr M.S. Sahoo.

In 2000-01, 17 small exchanges put together reported less than one per cent of total turnover while the big six exchanges accounted for 99 per cent.

By most parameters such as turnover, profits and return on capital, the case for closure or consolidation of these exchanges seem to be strong.

Over the last few years, the regional trading terminals of NSE have been reporting a much higher trading turnover than most of the regional exchanges.

No longer is the setting up of an exchange to service the requirements of investors in one part of the country a viable proposition.

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