KOLKATA: Come November 28, trading will come to a complete halt at the century-old Calcutta Stock Exchange (CSE). The Calcutta High Court on Thursday directed CSE members trading through the National Stock Exchange (NSE) platform to complete all open transactions by that date and vacated an interim stay on a contract termination notice sent to the CSE by the NSE on July 18, 2023.
Market regulator Sebi had suspended trading on CSE’s C-star platform in April 2013 but CSE brokers were allowed to trade on other bourses through different agreements. The CSE had in September 2011 entered into a five-year contract with NSE, with Sebi nod, to allow its traders to use the NSE platform. The agreement was automatically extended for another five years till September 2021.
On May 4, 2020, Sebi pointed to deficiencies in the running of CSE and wrote to NSE asking whether it was inclined to continue with the contract. The NSE then served a contract-termination notice to CSE on July 18, 2023. The CSE moved the HC and got an interim stay on the notice from another HC bench.
“The CSE can’t continue to operate by virtue of an interim order when the agreement (between the NSE and the CSE) expired in 2021,” the division bench of Chief Justice T S Sivagnanam and Justice Hiranmay Bhattacharyya observed on Thursday.
‘No prior Sebi nod for extension’
As a result of a Calcutta HC order asking CSE brokers trading through the National Stock Exchange (NSE) platform to square off their open positions by November 28, all CSE members will either have to take NSE membership or become sub-brokers of the exchange.
The CSE counsel pleaded that another bench of the HC, that had given an interim stay on NSE’s contract-termination motice to CSE, was scheduled to hear the case on November 30 and vacating the interim stay before that would put an end to trading of close to Rs 200 crore per day. The CJ-led bench, however, noted that the contract between the NSE and CSE had ended in October 2021 and there was no prior Sebi approval for an extension.
“This aspect of the matter is beyond doubt. The court can’t cover this statutory gap by an interim order,” the CJ observed.
The CJ said clause 13 of the Securities Contracts (Regulation) Act, 1956 provides that any contract entered into between members of two or more recognised stock exchanges shall be subject to such terms and conditions as may be stipulated by the respective stock exchanges with prior approval of the Sebi.
“We are inclined to vacate the interim order. The order may take effect from November 28,” the division bench ordered after the CSE counsel sought more time for the traders to “square off” their open positions.