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Spadework begins for small firms’ exchange

Calcutta, July 20: The Federation of Indian Stock Exchanges (FISE) will meet in Mumbai on July 26 to discuss the structure and formation of IndoNext — the bourse that regional stock exchanges plan for trading exclusively in shares of small-cap companies.

The M. R. Mayya committee that was mandated by Sebi to devise a survival strategy for regional exchanges had recommended formation of a new bourse similar to EuroNext — the exchange founded by bourses in Paris, Brussels, Amsterdam and Lisbon.

The committee led by Mayya said IndoNext — or the Indian version of EuroNext — should be reserved for trading in shares of companies with a paid-up equity of up to Rs 20 crore. Mayya advocated market-making —the practice of offering two-way quotes — to create liquidity in small-cap stocks that are traded infrequently on large exchanges.

“The Bombay Stock Exchange (BSE) has offered to promote IndoNext as a separate segment, on which members of the regional exchanges could trade. It is willing to share up to 25 per cent of the turnover fee to be levied on IndoNext trades with regional bourses that participate in the venture,” Mayya said

FISE had also appointed Mayya to draft a roadmap for the formation of IndoNext. “God willing, we should be able to get IndoNext going in six months,” said Mayya, a former chairman of Sebi.

IndoNext could log a turnover of Rs 100 crore to start with. “This could increase sharply if market-making works. It will not only help regional exchanges stay afloat, but also create liquidity in shares of companies with a small capital base,” Mayya added.

But could IndoNext, given its limitations, help regional exchanges turn the corner' Trading on nearly a dozen has stopped, and on most others — including the Calcutta Stock Exchange — transaction volumes are far below sustainable levels.

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