Madras Stock Exchange to shut shop after 76 years

CHENNAI: South India’s fountainhead equity trading house, the 76-year-old Madras Stock Exchange will cease to exist from May 30 after it failed to adhere to several new regulatory requirements, including increased net worth as outlined by markets regulator Sebi. The shutdown appears imminent unless there is a dramatic change in rules over the next couple of weeks.
A crucial board meeting held on Monday decided to call for an extraordinary general meeting of shareholders of the exchange by the end of May to inform them of the new requirements –– capital, technology and manpower –– which authorities feel are very difficult for a small regional entity like MSE to meet, and possibly start the process of a voluntary shutdown.
“It is true that there was a board meeting of the stock exchange today, but we will need couple of days to time before we communicate anything on the proceedings of today’s meeting,” Ramanatha N Kotagal, managing director of MSE, told TOI.
Complex capital market situations have made regional stock exchanges vulnerable to fund-raising capabilities and also increase tech investments to enhance surveillance. These entities have become dinosaurs, unable to keep up with the changes that swept the capital markets in the late 1990s with the advent of NSE.
The final nail for MSE came on March 12 this year when Sebi did not accord sanction to MSE’s trading platform, supplied by NSE IT (a subsidiary of the National Stock Exchange). The regulator said the exchange also did not have sufficient net worth to undertake clearing operations or settlement of trades.
It all started with a May 30, 2012 Sebi circular which asked MSE to earn Rs 1,000 crore as annual turnover and have a net worth of Rs 100 crore or more by May 30, 2014, failing which the exchange should consider “exit” options. As MSE had not achieved either, with the deadline just 30 days away, the shutting down of the stock exchange may become a reality.
An informal meeting of trading members on April 10 had also laid the ground rules for voluntary exit, sources said. A section of them, however, wanted the stock exchange to take on Sebi legally for killing an age-old institution with rules that made it hard for smaller entities to survive. “One-size-fits-all does not work,” members said.
Directors of the exchange were not enthused and have decided not to move the court, at least for now. “Sebi does not want to manage too many exchanges and with changing face of capital markets, they feel we will not be able to stand up,” a member said.
MSE tried other options like merger with other regional exchanges. “That did not move forward as equations with other exchanges were not working favourably,” a director said.