In its golden jubilee year, the Bangalore Stock Exchange (BgSE) will bid goodbye to its stock exchange operations. Shareholders approved the decision to voluntarily exit the stock exchange business at the annual general meeting held here on Saturday.
It will now function as a non-stock exchange company. The BgSE commenced business on March 17, 1963.
“The shareholders approved the resolution authorising the governing board to apply for voluntary de-recognition of the BgSE to Sebi as a stock exchange company, co-terminus with any suitable tie-up/arrangement/MoU of business consolidation with one or more stock exchanges,” said BgSE executive director Manjit Singh.
The BgSE’s trading subsidiary, BgSE Financials, floated in 2001-02, will continue operations. The BgSE will now seek formal approval from market regulator Securities and Exchange Board of India (Sebi) for the same, which will take about two to three months, chief operating officer of BgSE C Subramaniam told Deccan Herald.
“The BgSE will now function as a non-stock exchange company. The 11-member governing board of the BgSE approved formation of a steering committee to decide the future course of action post the exit, including new lines of business,” Subramaniam said. The committee will submit its report within six months, he added.
Problems for the BgSE, like many other regional stock exchanges in its category, started around 2000, when stock brokers migrated to the two premier stock exchanges of the country — the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) — in a big way. “The BgSE in a sense stopped functioning as a stock exchange from 2000-01, following the exodus,” Subramaniam said.
He said, “The NSE charges Rs 300 as brokerage for every transaction worth Rs 1 crore. If we were to replicate the same, we would need large volumes of transactions to comply with Sebi guidelines of an average annual turnover of Rs 1,000 crore. But volumes have now moved to the BSE and the NSE. Therefore, to us, continuing in the stock exchange business does not make business sense.”
Guidelines on exit policy, issued on May 30, 2012, stipulated that regional stock exchanges should have a minimum net worth of Rs 100 crore, which brought the BgSE once again to the crossroads, its annual report for 2012-13 stated.
Later, following Sebi’s approval for regional stock exchanges, BgSE members became sub-brokers with BgSE Financials, which acquired membership of the NSE and the BSE to enable its members and investors to trade.