In the mid-nineties, the board meetings of the Bombay Stock Exchange (BSE), as it was then known, were a media event. Scores of us market reporters routinely followed developments in the bourse, to try and get a glimpse of the agenda beforehand and scoop a story. Wire agencies and newspaper reporters would throng the 25th floor of Jeejeebhoy Towers just to get a soundbyte or two about what transpired in the meeting. Those were different times, when BSE was unquestionably the country?s largest bourse, commanding thousands of crores of trading volumes, and the National Stock Exchange (NSE) was just beginning to get its act together.
Cut to 2003. Today, the media hardly focuses on the board meetings of The Stock Exchange, Mumbai (the exchange has been rechristened), and unless there is a major development, BSE hardly ever makes it to the front pages. In cash market volume terms, NSE is way ahead ? more than double that of BSE, whose daily volumes are around Rs 1,000 crore, while the NSE canters ahead with average cash market volumes of over Rs 2,500 crore. The less one talks about derivatives, the better, since on that front, BSE is no competition for NSE at all. The gap is too wide: BSE?s derivatives volumes average just around 1 per cent or so of NSE?s figure of Rs 2,600 crore. For a stock exchange which was once the benchmark of the Indian capital market, this is indeed a sad state of affairs.
Ironically, BSE has a lot going for it even now. It is one of the oldest exchanges in Asia with a hugely strong brand known in the biggest markets of the world. It has a benchmark index, the Sensex, which still commands a lion?s share of eyeballs, and has employees with decades of experience in financial services. BSE also has a very strong membership profile. Yet, the exchange today is struggling to attract the best of the market players. BSE is today faced with a situation where a majority of NSE?s volumes are generated by players who, not so long ago, were the pillars of BSE.
The new executive director and CEO of the exchange, Dr Manoj Vaish, has his task cut out. Dr Vaish and his mates will have to ensure that they go to the base of the problem, find out what really ails BSE, and then move systematically in bringing it back at least on par with its competitor.
What, then, is the problem with BSE? For one, the reluctance of some of its members to allow the exchange to expand more aggressively, many believe, is costing it heavily. Even though the exchange now has reached a number of cities ? over 400 ? many feel it needs to expand further and quickly in order to garner greater business. But while the larger broking houses who generate the bulk of the volumes are in favour of the expansion, they are few in absolute numbers, with the majority (who generate relatively insignificant volumes) being opposed to this, as they fear a loss in their business. It will now be Dr Vaish?s task to ensure that the majority at the exchange understands that expansion will, in fact, enlarge the cake for BSE.
Currently, a number of other regional stock exchanges are also members of BSE through the subsidiary route, and are generating healthy volumes for the exchange. This will need to be further nurtured in the coming days and more regional bourses brought in as members to ensure BSE?s share of business also increases. But most important, BSE will have to ensure that its image in the minds of the government and the regulator is that of a forward-looking exchange which has broken away from the shackles of its past and is ready to face the future on a firm footing. The corporatisation plan which the exchange now puts in place will have to reflect this new agenda. Brokers are better off doing business, rather than running exchange administrations. By putting in place a completely professional administration at the board level, BSE will move one step towards getting back to where it belongs: up at the top among the best of the bourses.