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Undesirable move
The decision of the Securities and Exchange Board of India (SEBI) to protect the regional stock exchanges is a retrograde move, detrimental to the interests of investors. Globally, the trend is clearly that of merger and acquisition among stock exchanges, illustrated by the move to merge Amex and Nasdaq. SEBI's logic is difficult to understand. What extra value does a Ludhiana or a Magadh stock exchange offer which cannot be gained from the NSE? The NSE is a truly national exchange, and, with the expansion of BOLT, investors will have one more option. Sooner or later, the regional exchanges will die a natural death as investors become more aware of the benefits available in dealing through exchanges which have a national reach. As a result of poor liquidity, all that regional stock exchanges end up doing is hiking transaction costs for the shareholders.Another of SEBI's requirements is that in case a company decides to opt for voluntary delisting from a stock exchange (delisting from regional stockexchange is not permitted), the promoters/management will have to either buy or make arrangements for buying the holding of shareholders in that region. If a company which is listed on the BSE, at the regional exchange at Ahmedabad and the NSE, decides to get delisted from Ahmedabad exchange (BSE being the regional exchange), the offer to buy shares will have to be made to all the shareholders of the company in Gujarat. But in case the acquisition exceeds two percent of equity, the takeover code will be triggered. This is a grey area which needs to be clarified. Rather than trying to keep the regional exchanges alive by such artificial means, SEBI should pro-actively seek to hasten their demise, since they serve no useful purpose. Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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