Asia’s oldest stock exchange, the Bombay Stock Exchange (BSE), is planning to re-launch various products in its derivatives segment in the coming days. The exchange has been facing a severe crisis in its futures & options (F&O) category, which is threatening its profitability.
A top official from the BSE said that the BSE is also planning to seek help from strategic investor Singapore Exchange (SGX), which holds a 5% stake in the exchange.
Mahesh L Soneji, chief operating officer, told FE, “Currently, we are looking at various options and if it makes business sense, we will indeed ask cooperation and collaboration from SGX.”
The turnover on the BSE cash segment has nearly halved from last year, when around Rs 8,000-11,000 crore was transacted daily. In fact, on Tuesday the exchange saw cash volumes to the tune of Rs 2,600 crore. The F&O segment of BSE does business worth a few lakhs. In contrast, even though volumes on the NSE have fallen, it has a daily turnover of around Rs 31,000 crore in the F&O segment and Rs 10,000 crore in the cash segment.
Currently, SGX and Deutsche Borse (DB) hold 5% stake each in the BSE. In October 2008, the Securities & Exchange Board of India (Sebi) had increased the ceiling from 5% to 15% for strategic long-term investors in stock exchanges.
“In the board meeting held a few days back in the BSE, there were talks of the both the strategic investors looking to increase their stake,” said an official from the BSE on condition of anonymity.
On whether BSE will ask SGX to help them out in the derivatives segment, Soneji said, “At this point of time, we can’t accept or deny anything. However, we are working on several issues and at an appropriate time, we will share the details on this matter.”
The next BSE board meeting is scheduled in the month of March and officials said that at that time, some decision will be taken to increase the stake of two strategic investors.
SGX has created several advantages in this area. It has seen a 17.2% annual growth in its derivatives segment for the year ended December 31, 2008.
Hsieh Fu Hua, chief executive officer of SGX, said in a press-release, “Our revenues have been affected by the difficult market conditions but our derivatives business has been relatively resilient. Cost management has been a key focus as we remain committed to investing in technology, people and product development, ensuring that we are well-positioned for a market recovery.”