Bombay Stock Exchange (BSE), the country?s second largest stock exchange, is set for momentous change. BSE has invited its two strategic investors ?Deutsche Boerse (DB) and Singapore Exchange (SGX)?to join its board of directors, paving the way for a major change in its composition. Thus far, there was no foreign investor on the board of the stock exchange.

Confirming the move to invite the two foreign exchanges?both of whom hold 5% each in the exchange?a top BSE source told FE: ?We have invited them to join our board. We are in discussions with them and they have responded positively.?

The two exchanges can join the board without the BSE having to expand it since there are already two vacancies following the resignations of former exchange chairman Shekhar Datta and Jamshyd Godrej, who resigned in June. On Thursday, BSE?s managing director and chief executive officer Rajnikant Patel also resigned, in what is being seen as the culmination of internal problems at the 133-year-old bourse. Chief operating officer Mahesh L Soneji is now looking after the day-to-day affairs of the exchange until Patel?s replacement is appointed.

There have sections of the exchange which have been pushing for DB and SGX to join the BSE board as that could add value to the exchange, which is battling to increase market share and fight competition from rival National Stock Exchange (NSE). After the exchange turned into a demutualised and corporatised entity, DB and SGX picked up 5% each at Rs 5,200 per share.

Sources in Securities & Exchange Board of India (Sebi) have also made it clear they have no problems if foreign investors join the BSE board. The NSE board already has a representative of NYSE Euronext on its board. NYSE holds a 5% stake in the exchange.

BSE has also decided to drop the plan to pick a 26% stake in commodity bourse National Multi-Commodity Exchange (NMCE), since it does not feel it will have enough leeway in driving the commodity bourse. However, BSE will continue to look for opportunities in the commodities space.

The BSE board has, apart from chairman Jagdish Capoor, Jitesh Khosla, joint secretary, ministry of corporate affairs, and retired bureaucrat SN Menon as public interest directors. This apart, Ishaat Hussain of Tata Sons, Vivek Kulkarni, chairman and CEO, Brickwork India and Sudipto Sarkar, senior advocate, Kolkata High Court are on the board as shareholder directors. Prakash R Kacholia of Emkay Global Financial Services, Balkishan Mohta and Siddharth J Shah of JGA Shah Share Brokers are on the board as trading member directors. Patel?s resignation has reduced the board’s present strength to nine.

The CEO?s resignation, coming after a series of controversies rocked Asia?s oldest stock exchange, has meant the exchange will now shortlist candidates to replace him, the process for which has already begun, sources said.

While some sections had alleged Patel wasn’t given a free hand and had to face interference from a section of brokers, sources in BSE rubbished these allegations and said brokers had three seats on the board and were free to voice their opinions.

?Let us not forget they own 49% of the exchange, and have a right to express their views on the board. There is absolutely no question of interference by brokers in the running of the exchange. These are baseless charges,? a senior BSE functionary said.

While Patel had been pushing for some deals ? like the proposed stake buy in NMCE ? sources said the NMCE deal made no sense for BSE now, since the exchange wanted to drive the strategy at the commodity bourse, which would now not be possible. Reliance Money, an Anil Dhirubhai Ambani Group outfit, recently bought a 26% stake in the exchange, with its chief executive Sudip Bandopadhyay joining the NMCE board.

?There?s no point in picking the stake if we cannot drive the exchange. There will be areas of conflict with another large investor coming in, which will make it difficult for us to run it. For instance, if we want to make some key appointments and then that is challenged by a section of shareholders, it will make things needlessly difficult. So we have dropped that plan,? BSE sources told FE.

On the other controversial deal, the technology pact with OMX of Sweden, the exchange is seeking clarifications from the firm on some aspects. The bourse is also awaiting Sebi guidance on the proposed listing of its shares.

The board of the exchange will meet again later this month to discuss these and other issues. The annual general meeting of the exchange is also slated to be held shortly.