Differences between a section of the board and the management of the Bombay Stock Exchange (BSE) are expected to hang heavy as the bourse?s board meets on Saturday. A major contract entered into between BSE and Swedish firm OMX, and a PricewaterhouseCoopers (PwC) report on market-making of Sensex futures could be key areas of debate.
The board meeting is significant, since it comes close on the heels of the resignation of former chairman Shekhar Datta, who quit amidst controversy over his role in the board and severe differences with a section of the directors. BSE has appointed Jagdish Capoor, chairman of HDFC Bank, as the new non-executive chairman in place of Datta. The resignations of Datta and another shareholder-director Jamshyd Godrej have caused two vacancies on the 12-member BSE board. Board members are tightlipped about the meeting agenda. While Capoor did not divulge what the board would discuss Saturday, he did make it clear that the BSE management, led by managing director and CEO Rajnikant Patel, was not short on empowerment. Capoor told FE: ?The management is fully empowered. There is absolutely no problem on that count.? This is in sharp contrast to Datta?s claim that the bourse management was not adequately empowered. There was also talk that a section of the board members were interfering in the day-to-day running of the exchange, something many senior broker-members have since rubbished. Significantly, a senior member of the BSE administration also told FE: ?Whatever the problems may be, it is certainly not true that brokers are interfering now. This structure does not allow that anymore.?
The OMX contact for BSE?s trading & clearing systems on derivatives & securities trading, costing around Rs 240 crore, is being seen by many as too expensive, since the spend on software and hardware at rival National Stock Exchange (NSE) and even at depository National Securities Depository Ltd (NSDL) is reportedly far lower even after many years of being in existence. ?We will discuss some aspects with the suppliers,? board sources told FE.
Magnus Bocker, CEO of OMX, had, in January told FE that the system will allow BSE to clear a wider range of products, as well as offer a new set of clearing services to its members.
?The contract is for a wider period and we will be working for more than a decade with the BSE. Even the annual maintenance contract will remain with the OMX. It is not a one-delivery form of a contract. It is a long-support and development form of a contract. This is one of the biggest deals in the history of OMX, and it is a very important contract for us,? Bocker had said then. The PwC report on the incentive scheme to market makers for Sensex futures is also expected to be a point of debate, since sections feel the incentives were too high. Questions might be raised on this aspect and also on why the management chose to dole out such high incentives. The vacancies on the board may be filled only after the general body meeting of the exchange on August 19, sources said. These being shareholder-director vacancies, markets regulator Sebi is not expected to make any interjections on the appointments. However, some said there could be replacements even before August 19. While Sebi Bhavan has maintained silence on the developments at BSE, the regulator is understood to be keeping a watchful eye on the goings-on. Sebi?s view is that while the exchange needs to set its house in order and compete with NSE for market share, the image of the exchange, a public institution, should not suffer, as that would also be bad for the overall market.