‘BSE will consolidate further with regional exchanges’

Updated: Jan 21 2002, 05:30am hrs
The deputy executive director of the Bombay Stock Exchange (BSE) Dr Manoj Vaish speaks to Sharad Mistry of The Financial Express on the course of action that the BSE has charted to realise its Vision Statement: "To be the Exchange of Choice in India." Excerpts:

How has the BSE fared over the last six years vis-a-vis the NSE -- in terms of volumes, turnover

Currently, around 5,796 companies are listed on the BSE, more than any other exchange in the world. During the last few years, the exchange registered consistent growth in turnover both in specified and non-specified segments. The average daily volume of turnover in specified shares increased from Rs 1,203 crore in 1998-99 to Rs 2,442 crore in 1999-00 to Rs 3,621 crore in 2000-01. The average daily turnover thus showed a sharp increase of 46 per cent in the year from Rs 2,734 crore in 1999-00 to Rs 3,984 cores in 2000-01.

Further, BSE also registered the highest turnover of Rs 7,831 crore on September 13, 2000, and the highest number of trades of 10.67 lakhs on February 28, 2001. There is sizeable growth in the number of shares traded in the exchange from 2,086 crores in 1999-00 to 2,578 crores in 2000-01 showing a rise of 24 per cent.

What reasons would you attribute to the current state of affairs at the BSE

The exchange has been functioning smoothly and efficiently since the early part of last year, despite the absence of a full board. During this period, it has continued to embrace new concepts including derivatives and free float and launched the BSE-TECk Index, which are in line with international standards. Also, the risk management system is the best in the country and has stood the test of time.

In the recent stock market developments, the exchange has proved its effectiveness with the number of defaulters being low as well the low quantum used from the Trade Guarantee Fund (TGF) compared to the other exchanges. We have already initiated demutualisation/ corporatisation process as early as 1999 and await Sebi’s clearance on the submitted plan.

Meanwhile, please note that the current state of affairs may be attributed to the following:

One, till end-1999 the BSE was restricted to expand its reach across the country. The regulatory advantage enabled the other exchange to develop and build a strong network on an all-India basis, which is not very easy to penetrate.

We feel that if BSE had also been permitted at the same time to expand on an all-India basis, the scenario today would have definitely been very different. This regulatory advantage puts us behind the other exchange by more than four years.

Two, because of the above, the BSE’s distribution network is essentially Mumbai-centric with the expansion in other cities possible only through a network of sub-brokers.

Since sub-brokers are not allowed to deal in the derivatives, our distribution has been affected much more.

Three, a number of BSE members’ applications for trading in derivatives are pending clearance with the regulator and we have introduced the country’s first internet-based trading through BSEWebex.

What are the exchange’s plans to move out of the current state

We have already set up a comprehensive broker servicing cell to help brokers with a single point interface with the exchange for all their queries; we have offered attractive incentives to brokers to trade in the derivatives segment.

In addition, we plan to expand BSE’s reach outside Mumbai through expansion and consolidation with regional stock exchanges. BSE is in the process of merging with the Delhi Stock Exchange shortly, and some 13 SEs have already taken membership of BSE. Our state-of-the art technology can be shared with the regional stock exchanges and its members, which will help more companies and market participants come under the ambit of BSE.

Apart from increasing the BSE’s market share, these initiatives would also help investors trade in a wider market place.

In addition to incentives to brokers in the derivatives segment, the BSE has incorporated the concept of market making -- a move that would increase the overall liquidity and depth in the market. The BSE Derivatives Segment has designed an attractive and innovative scheme for the prospective ‘Market Makers’ in the derivative products (futures and options on index/ stocks). The scheme would be valid for one year till September 30, 2002. The market makers would have additional incentives.

How does BSE intend to spread awareness among the investing community

In addition to our other programmes, the exchange has recently tied up with Zee Network for producing and telecasting a 26-episode programme on Investor Awareness and Education on ZED TV.

Where does the management see BSE and its share in the domestic securities’ business two years from now

The exchange strives to attain 50 per cent of the capital markets share in the domestic securities business by 2003-04 from the current level of around 35 per cent.

What are the steps taken for technology upgradation

Investment in technology during the year 2000-01 was to the tune of Rs 95 crore. During the year, the BSE commissioned its own Master Earth Station (HUB) which uses full transponder on INSAT 3B satellite to cater to Trader Work Stations (TWS) located over 400 cities across the country.

The BSE Online Trading (BOLT) platform’s capacity was further enhanced to handle over 20 lakh trades per day, which is among the highest in the country.