Terming technology as a key focus area for BSE to keep growing, its CEO Ashish Chauhan has said profit is just a “by-product” for the exchange and regulatory role accounts for almost 99 per cent of its work in terms of importance. “We are the first-level regulator and our main business is compliance. We cannot be pursuing profit as the end-product as because of being a regulator, there are expectations from the government, the society and everyone else for a stock exchange to behave in a particular way,” he said.
The BSE, Asia’s oldest bourse which was earlier known as the Bombay Stock Exchange, recently became the country’s first stock exchange to get listed after a bumper IPO. Chauhan said the listing was “a very important milestone” for him as well as for the exchange, despite it having no benefit for him as an individual executive as regulations do not allow ESOPs or even profit-linked bonus. “… Our main business is compliance and if the profit comes, it would be a by-product,” he told PTI in an interview.
“That framework has to be kept in mind for every exchange operator so that everyone trusts the framework and the trust grows over a period of time.
“Within this particular framework, if you take away the regulatory part, which is almost 99 per cent of our work in terms of importance, for the remaining one per cent of hard work, the biggest game changer is the technology,” he added.
“Within that framework, if you create newer products and newer services, or may be rework some older products which have not been that successful, we need to work on that. That’s how we see it,” Chauhan said. Talking about the recent IPO and the history behind that, he said when the BSE was demutualised in 2007 — when the shares were sold out — a kind of promise was given under demutualisation scheme, gazetted by Sebi, that BSE will list. “So, in that sense it was part of the agenda for ten years and it happened finally in 2017. So, effectively it was a long-pending need of the existing shareholders which we had to fulfil,” he said.
BSE has grown substantially in various segments in recent years including in the equity markets, currency derivatives, mutual fund distribution and debt placements. Its total revenue rose by 19 per cent in the nine-month period ended December 2016 to Rs 569.62 crore, while net profit rose by 32 per cent to Rs 160.46 crore. Chauhan, however, said listing would not change much to the way the exchange functions as it has been already acting like a listed company for the last 4-5 years — whether it was in terms of quarterly results and other required disclosures.
“We never thought we were not a listed company as far as transparency is concerned. That’s why, post-listing we do not see that many changes that are required for BSE to cope with the listing. Generally, many companies which are not used to that discipline of quarterly disclosures and other listing requirements, they need some sort of discipline,” he said.
“In our case, we are a very different organisation. Our 11-member board of directors has six public interest directors who are nominated by Sebi. So, basically it’s a very different perspective and in a sense we are primarily a regulator also.” Talking about the business side of the exchange, he said technology plays a key role there whether it is about offering faster trading, or to scale up to newer products and newer abilities.
“Moreover, if you are able to control your costs, because technology also involves large costs. We are primarily now what I call a fintech company where technology is a large strategic tool. “So, we have been focussing on this for last few years and we will continue to focus on that. For any exchange, keeping the technology in focus is very important and then there are some subsets to that such as cyber security which is now becoming very important. “So, that is a focus for the next year or so,” said Chauhan, who studied mechanical engineering at IIT Bombay and management at IIM Kolkata and was one of the founding team members at rival National Stock Exchange. He said the BSE is already the fastest exchange in the world and improvements will continue on that front. “For example, we were six microseconds and now we are coming in the 4 microseconds range. That improvement would continue but those would be more like incremental now.
“Six to four is not what a great improvement in absolute terms, but in the world markets, there are not too many organisations which are able to have that kind of speed and that kind of scale. The scale at which we operate is very high like 500,000 order per second and so.” Listing out various core areas of importance for the exchange, he said these include technology, functionality, speed, security, scale, flexibility, stability, operating ease and disaster recovery.
“All those things make one whole system and therefore technology will remain our mainstay in terms of costs, number of employees, investments, etc.
“Cyber security will remain in focus for next year or two, so that we bring it at par with what is happening abroad, bring in the latest technologies and work with all the government agencies to ensure that the critical national infrastructures are secured, especially in the markets area.”
“The second part is the newer products and services that are allowed. As I said we are highly regulated compliance oriented business, we have to do anything once it is allowed. We don’t do anything that is not approved in a sense,” he added.