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21 out of 23 bourses are in the red

BS Markets Bureau

Falling volumes will be the last nail in the coffin for small stock exchanges in the country. These exchanges may incur huge losses in the current financial year as their business income could witness a drastic fall with declining in trading volumes.

Of the 23 exchanges, 21 have already suffered a combined loss of Rs 20 million in 1999-00. Figures for 2000-01 are not yet available, but according to sources, the loss is likely to deteriorate further. Only the Bombay Stock Exchanges and the National Stock Exchange registered profits with the former amassing a profit of Rs 523 million and the latter earning a profit worth Rs 455 million.

Most of the small exchanges have managed to survive due to high non-business income. Apart from NSE and BSE, the share of non-business income in total revenues of all other exchanges have ranged from 70 to 95 per cent. The non-business income includes income from listing, interest and rent.

The Over the Counter Exchange of India has incurred highest loss of Rs 66.5 million during 1999-00 followed by the Inter-Connected Stock Exchange at Rs 45.2 million, the Bangalore Stock Exchange at Rs 12 million, the Coimbatore Stock Exchange at Rs 12 million and the Cochin Stock Exchange Rs 11 million.

Barring the Calcutta Stock Exchange (Rs 99 million) and the Delhi Stock Exchange (Rs 27 million) only the Ahmedabad and the Madras stock exchanges managed to earn profit above Rs 5 million.

Listing has become the primary source of income for small exchanges. In case of the Guwahati Stock Exchange, listing fee accounted for 85 per cent of its total revenues.

Even income from interest and rent account a substantial chunk of the revenues of these exchanges. For example, income from rent and interest accounted for as high as 75 per cent in OTCEI's case.

However, with many companies now planning to de-list their securities from smaller exchanges and list the shares at an exchange having national presence these exchanges may lose a major source of income, leading to a severe deterioration of their financial health.

Moreover, even with current listings, the exchanges will face problems. Introduction of uniform settlement across the country will put an end to arbitrage and shifting of positions. With no carry-forward mechanism in place, the segregation of cash and futures markets could also create a vacuum in volumes leading to almost negligible business income, which includes membership, transaction and service charges, brokers said.

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