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The article features the problems faced by Indian exchanges in demutualization and the reasons behind the slow pace.
By separating ownership and trading rights and creating a good corporate governance structure demutualization of stock exchanges would help them to enter the capital market, to meet their requirements of finance. Thus, the demutualization is a process of separating a stock exchange from a "non-profit" entity to a "for profit" entity.
The Securities and Exchange Board of India (Sebi) issued a notification of the C and D schemes on three different dates for all the 19 stock exchanges, i.e., May 20, 2005, August 20, 2005 and September 15, 2005. Then the Sebi fixed one year time from the above dates for completing the process on demutualization. None of the 19 stock exchanges could complete demutualization during the above period. The Sebi further extended the above period for one year more expiring on May 20, 2007, August 20, 2007 and September 15, 2007.
Till date, the Bombay Stock Exchange is the only exchange out of 22 which has been able to demutualize w.e.f. May 19, 2007, the extended time. Demutualization for many of the regional stock exchanges seems to be a futile exercise as the exchanges are not operational for many years. Duplicity of resources (i.e., of stock exchanges) and their subsidiaries is a continuous financial burden on them. Moreover, these exchanges do not have any tangible revenue model before them. |
