CSE to fund stake buyout in clearing corp by selling land

The Calcutta Stock Exchange (CSE) is planning to sell assets worth nearly Rs 260 crore, which will enable it to buy a stake in a clearing corporation over the next six months.

The exchange has been in touch with Indian Clearing Corporation Limited (ICCL), the Clearing Corporation of BSE, and MCX SX Clearing Corporation to formalise an agreement, according to sources. CSE needs to either tie-up with a clearing corporation or pick up a stake in it clearing corporation to meet the norms for regional stock exchnages set by the market regulator.

CSE has appointed Jones Lang LaSalle (JLL) to sell nearly three acres land parcel owned by it on E M Bypass. According B Madhav Reddy, Managing Director and CEO of CSE, the exchange is expecting at least Rs 260 crore from the sale.

In 2012, Sebi brought out new norms for RSEs, under which, they need to own a trading platform, with an annual trading of not less than than Rs 1,000 crore, to stay afloat. This apart, the net worth of the exchange should not be less than Rs 100 crore, said the norms. CSE was the only RSE to conform to the norms on trading platform and net worth, which impelled other RSEs to seek a tie-up with CSE. The exchange has its own trading platform called C-Star.However, CSE failed to meet the criterion set by the regulator of a tie-up with a recognized clearing corporation.Earlier, CSE had formalised a deal with ICCL, the Clearing Corporation of BSE, which settles the trades of both BSE, to execute trades on C-Star. However, Sebi raised objections to the deal.

The other option for CSE was to have its own clearing corporation, but this required a corpus of Rs 300 crore. The Sebi deadline to meet the new norms for RSE expired on May 30th.Thus, in April 2013, CSE had to suspend trading as it failed to comply with the Stock Exchanges and Clearing Corporations) Regulations, 2012.At present, at CSE, the daily turnover at BSE and NSE platforms is close to Rs 300 crore. This apart, its annual turnover in C Star was close to Rs 1000 crore before April 2013. At present, there are close to 200 active brokers in CSE.Meanwhile, CSE has already signed agreements with fours regional exchanges-the Madhya Pradesh Stock Exchange, OTC Exchange Of India (OTCEI) , Ludhiana and Bangalore Stock Exchanges to take over their operations.

Under the consolidation plan with Madhya Pradesh Stock Exchange, CSE plans to absorb its brokers, companies and employees and of the exchange. In addition, CSE also plans to open an office at Indore. In case of OTCEI, it plans to acquire its companies and members. For Lundiana and Bangalore Stock Exchanges, the plan involves migration of their listed companies to CSE. CSE was on the verge of extinction after being hit by one of the biggest scams in the history of stock markets in 2001. However, the exchange got a fresh lease of life following its demutualisation in 2007, when several entities, including BSE, picked up stakes in it.

Apart from BSE, there are 30 investors at CSE, including West Bengal Infrastructure Development Finance Corporation and several Kolkata-based private companies. CSE is the only regional exchange to have its own trading platform, the C-Star.

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CSE to fund stake buyout in clearing corp by selling land