The Supreme Court of India has decided to postpone its intervention in the ongoing saga of the Calcutta Stock Exchange (CSE), India’s oldest stock exchange. The court’s decision comes after the Calcutta High Court granted the CSE a further extension to comply with the Securities and Exchange Board of India’s (SEBI) stringent 2012 Exit Policy. This extension allows the CSE until February 19th, 2025, to meet the policy’s requirements.
The Supreme Court bench, comprising Justice Abhay S. Oka and Justice Augustine George Masih, reasoned that given the relatively short timeframe until the February deadline, immediate intervention was unnecessary. The court, however, will revisit the CSE’s compliance with the Exit Policy at its next hearing scheduled for March 7th, 2025. This means the CSE’s future remains uncertain until at least next year’s hearing.
SEBI’s strong opposition to the extension underscored the gravity of the situation. The regulator, arguing before the Supreme Court, voiced serious concerns that the CSE has become a breeding ground for market manipulation and consistently failed to meet the standards mandated by the 2012 Exit Policy. Additional solicitor general N Venkataraman, representing SEBI, forcefully argued against any further extension, emphasizing the CSE’s prolonged non-compliance over the past twelve years. He stated, “We don’t want one more day. For 12 years they have not been doing business, but are becoming a hub for manipulation. That’s our fear.”
The 2012 Exit Policy demands significant improvements from stock exchanges, including the establishment of a clearing corporation and the achievement of a ₹1,000 crore turnover. Failure to meet these conditions by the February deadline will likely result in further action from SEBI, potentially leading to the exchange’s closure. This underscores the high stakes involved and the critical importance of the CSE’s compliance with the policy.
The Calcutta High Court’s decision in August 2024 to grant the six-month extension followed its earlier affirmation of the Exit Policy and the Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2012, in February 2024. The extension provided the CSE with the opportunity to either create its own clearing corporation or collaborate with an existing one. This reflects the complexities involved in achieving compliance with SEBI’s regulations.
The CSE’s history is marked by a period of decline after the emergence of the National Stock Exchange (NSE) in 1994 and the subsequent ban on the ‘badla’ trading system in 2001. Scandals, such as the Ketan Parekh scam, further eroded its reputation, contributing to its eventual suspension by SEBI in April 2013 due to regulatory and compliance issues. Following the suspension, CSE operations were relegated to providing its members with a trading platform on the NSE, a partnership that ended in 2023 due to persistent operational deficiencies. This leaves the CSE in a precarious position, fighting for survival against regulatory pressure.
The CSE’s predicament mirrors the experience of other regional stock exchanges between 2013 and 2015. Several, including those in Hyderabad, Coimbatore, and Mangalore, ultimately exited the market, prompting listed companies to migrate towards the national exchanges, NSE and BSE. This trend highlights the increasing consolidation within the Indian stock market landscape and the challenges faced by smaller regional exchanges in competing with their larger counterparts.
