Ludhiana stock exchange to be closed by 2015
Ludhiana, July 17, 2013 -
Set up in 1981 with a purpose to help the industry mobilise funds from the public, the Ludhiana Stock Exchange (LSE) Limited will be history by 2015.
In a meeting held on Monday it was decided that the company will opt for voluntary exit under the exit policy for derecognised and non-performing stock exchanges of Securities Exchange Board of India (SEBI).
The issue was under consideration of the management of the LSE for over an year.
Earlier, the company's management was weaghing the option of merger with the Kolkata stock exchange to fulfil the conditions of net worth and annual turnover to remain on trading platform.
WHAT IS THE EXIT POLICY OF SEBI?
In its circular issued on May 30, 2012, SEBI had issued guidelines for exit options for derecognised or non-performing regional stock exchanges.
The exit policy was with a purpose to shut down the nonperforming stock exchanges and to provide chance to eligible companies listed with these stock exchanges to get listed with other stock exchanges where trading for these companies can take place.
As per the guidelines, any regional stock exchange across the country will have to show net worth of Rs 100 crore by May 2014, and annual trading turnover Rs 1,000 crore by May 2015 in order to avoid compulsory or voluntary exit.
These stock exchanges, however, have been given the option of merger with other regional stock exchanges to fulfil the conditions collectively.
The main problem regional stock exchange faces is that as per the exit guidelines, it has to contribute up to 20% of its assets (after tax) towards SEBI Investor Protection and Education Fund (IPEF) for investor protection and in order to cover future liabilities, if any. The SEBI will also recover the pending brokers fee from regional stock exchanges under these conditions.
Chairman of LSE Limited, VP Gaur, said that he had met SEBI chairman UK Sinha in Chandigarh recently and raised this issue of IPEF and future liabilities, who assured to find some solution to the problem.
Keeping in view that the present net worth of LSE is about Rs 10.5 crore and trading been completely stopped here, it is impossible for LSE to fulfil two conditions to remain in business.
WHAT DOES LSE CLOSURE MEANS?
Though trading on platform of LSE had been stopped in 2000, the trading for 326 companies listed with the LSE at present can take place at National Stock Exchange or Bombay Stock Exchange or other stock exchanges fulfilling the SEBI conditions.
The companies, which have not listed with these stock exchanges, shall have to do this by fulfilling the conditions.
*HT Media Ltd.