Trader-Getty-1200

MUMBAI: Companies exclusively listed on the BSE are increasingly offering their shares to investors on the NSE platform through ‘Permitted to Trade’ category, a regulatory framework.

More than a dozen such companies — 14 to be precise — have listed their stocks for secondary market trading this year compared with just four in the past eight years. Some of the companies that got listed this year include SpiceJetNSE 0.12 %, Force MotorsNSE 1.17 %, Shree Digvijay Cement and Hindustan Foods.

The move aims to boost liquidity in their stocks as offering their shares on the NSE helps in attracting more trading volumes.

“This is a healthy practice for all stakeholders as it helps to increase liquidity of the stocks,” said DK Aggarwal, chairman & managing director of SMC Investments & Advisors. “There are stocks which are exclusively listed on a single exchange — this restricts liquidity.”

“Generally, there is demand from various investors who want to see those stocks get listed in other exchange(s) for secondary market trading,” he said.

A company choosing to list on an exchange has to sign a listing agreement with the particular exchange and is expected to comply with all the statutory requirements as specified in the listing agreement. The exchanges also have the power to take action and penalize the companies in case of non-compliance.

However, “Permitted to Trade” category allows a public company to trade on an exchange where it is not listed. In India, a company that is exclusively listed on the BSE can offer its shares on the NSE platform and vice-versa. But companies using the framework needn’t sign a listing agreement on the exchange where they choose to offer their shares and hence the compliance burden remains unchanged.

In order to enhance liquidity of a particular stock, investors approach exchange where they want it to get listed. The destination exchange permits such proposal based on certain inherent criteria.

Globally, in a multi exchange environment, exchanges have allowed trading of securities which are not listed on them. NYSE, NASDAQ, for instance, have done it.

Back home on the NSE, half the companies permitted for secondary market trading this year have seen their total trading volumes (NSE and BSE) surge more than 100%, brokerage sources said.

“We would want all exchanges to drive efforts to encourage the Permitted to Trade category following such demand,” said Aggarwal.

The Securities & Exchange Board of India does not allow Indian exchanges to list on themselves. This means, BSE shares have to be listed on the NSE and vice-e-verse. NSE’s initial public offering has not yet come up, but those shares have to be listed on the BSE or any other exchange barring NSE itself.

“The regulatory framework permits a company which is listed on one exchange to be permitted to be traded on another exchange platform,” said a BSE spokesperson replying to ET’s query.

“The obligation of listing regulations remains with only that platform where it is listed,” he said.

BSE did not specify how many stocks exclusively listed with the NSE have made their way to its exchange this year under the Permitted-to-Trade category.

This does not require the approval of the company and is based on the request of the trading members of that platform, BSE said.

This process is in existence for nearly a decade where several stocks are traded on Permitted to Trade basis on alternative trading platforms. However, it is showing signs of revival this year.

[“source=economictimes”]