From being a premier stock exchange, MSE is now a non-entity. What are the reasons for this?

I won't say a non-entity. We are going through a bad phase. The advent of National Stock Exchange (NSE) which was given special position and funds that was not available to other exchanges resulted in creation of an imbalance. It was suddenly announced that a national stock exchange would come into existence with necessary funds and powers to set up trading terminals with the latest technology wherever it wanted. Even before regional stock exchanges could realise what was happening, a huge cash market was set up all over the country, thereby affecting the prospects of existing players. By the time MSE could catch up with NSE in technology, around 60 NSE terminals have come up in Chennai.

Can MSE regain its lost glory?

A: Traditionally, MSE thrived on arbitrage that came about on account of two delivery days in a week, wherein BSE and other brokers used to shift their positions. At the same time, investors were given time up to 21 days to deliver the shares. They were in a position to carry their position from one settlement to another. Thus, it had the combination of liquidity and carry forward capacity - a market with best of both worlds.

These special features were lost over a period of time. When we introduce badla, our members can take a long-term outlook of the market. It will also result in some NSE business being shifted to MSE. The rolling settlement that we are contemplating would offer investors liquidity, thereby bringing back features that were unique to MSE.

Within six months of the introduction of badla and rolling settlement, we expect the volume to go up from current level of Rs 2 crore to Rs 9 crore. Once new blood is infused through expansion of membership, trading volume is expected to go up by another Rs 3 to Rs 4 crore. We are also planning to set up terminals outside Chennai.

The overall volume would significantly improve if the general market condition improves, especially the primary market listing and trading, which constituted nearly 60 per cent of the trading those days.

Badla and rolling settlement are your last hopes?

Yes. Badla would be the litmus test. Mock trading will start from August 15 and badla would be introduced in the first week of September. But to reach badla, we have put in place a clearing house, broker insurance, settlement guarantee fund etc. All these took us more than a year. We are also looking at other options to capitalise on technology that we have built up. The governing council of MSE has given an in-principle approval to lease out its spare on-line trading capacity for commodities trading.

Talks are going on. We are also talking to BSE for acting as a clearing house for their southern region operations. We are also looking at internet trading. Fortunately, we are well off financially and it would not be a problem to spend money on new technology.