The Telegraph
Since 1st March, 1999
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Weight of tax dues on future

Calcutta, Nov. 29: Brokers are apprehensive that they may have to clear their turnover tax dues to Sebi to obtain trading rights on the demutualised stock exchanges.

“This might well mean the beginning of the end for regional bourses and their members,” said a senior broker of Calcutta Stock Exchange (CSE). Brokers of Bombay Stock Exchange (BSE) too may be affected as much.

The decision on demutualisation implies regional stock exchanges including BSE, will cease to exist in their present form. New corporate entities will have to be created, and brokers will have to seek Sebi’s approval to trade on them.

“We are apprehensive that Sebi may not allow us to trade on the newly-formed bourses without clearing our turnover tax dues though we are in no position to pay up now,” said a BSE member.

“We may even have to pay an entry fee to the new exchanges to obtain trading rights. The financial implication of Sebi’s decision is not clear yet, but doesn’t look like it’s going to do any good,” he added.

Sebi has given the stock exchanges six months to draw a roadmap for demutualisation. Over the next six months, they will have to evaluate their assets, which in the case of BSE and CSE can pose many a problem, as the assets of these exchanges are mostly illiquid. The permission to introduce trading in derivative instruments on the regional bourses is being seen as inconsequential. “Derivatives cannot revive the cash market, and derivatives cannot be successful without a vibrant cash segment,” said a commentator.

“BSE’s derivative segment was a non-starter. There is no reason to think it will revive CSE, despite the love for deferral products in this part of the country. But anyhow, it’s a question that will arise only if we survive demutualisation,” a CSE member said.

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