For those of us who have been used to doing the rounds of the Bombay Stock Exchange (BSE) as reporters in the mid-1990s, the latest controversy has a sense of d?j? vu to it. The twin resignations of BSE?s chairman Shekhar Datta and shareholder director Jamshyd Godrej were sudden, but are symptomatic of the fact that, corporatised avatar notwithstanding, BSE hasn?t quite been able to kick the habit of courting controversy.
Predictably, sections of the exchange have begun floating rumours saying the chairman could not carry the board along on a number of issues. There is also talk of bitter infighting relating to a major technology contract entered into by the exchange.
The pro-Datta view is that he was in favour of empowring the management of the exchange but was getting increasingly frustrated in his attempts. Whatever be the truth, the resignations at BSE, coming as they do just a year after the exchange was corporatised, point to the fact that there is still a good distance to be traversed before the exchange becomes a corporate entity not just in name but in the manner it conducts business. Thanks to the insistence by the government and the regulator, the corporatisation initiative at stock exchanges is now a reality, but as the Datta episode shows, there are niggling issues which still need to be sorted out if Indian bourses are to be run as corporate entities in the real spirit of good governance.
In this context, some questions come to mind: Why is it that only in BSE, professionals appointed to run the exchange have not been able to complete their tenures or have been dogged by controversy? Recall the cases of AN Kolhatkar, RC Mathur, et al, and you find that, though the reasons for their exit may be pretty different, they have been mired in controversy. Contrast that with the stable and smooth tenures of the managing directors of rival National Stock Exchange.
Does a section of the BSE board?some trading member representatives?really wield unnecessary influence and are they really trying to micromanage the exchange? Does this section have enough numbers on the board to do so, or are they also being aided by other board members who should not be involving themselves in such matters at all? What is the nature of the relationship between the professional management at the exchange and the board?
NSE does not have any broker-members on its board, but BSE does. Is it time for a net worth criteria, perhaps, to be imposed for broker-members to be on the board of the exchange?
BSE now has high-profile domestic and overseas shareholders, including Deutsche Boerse and Singapore Exchange. The objective of getting these shareholders in was to bring in greater expertise, technology and knowledge to the exchange, and it may also be worthwhile to examine the possibility of getting them on the board to broad-base it further. The NSE board, significantly, has an NYSE Euronext member.
Clearly, there?s a lot of work to be done at BSE. It still lags behind NSE woefully on the futures & options (F&O) front. Consider this: the average daily F&O turnover at BSE is a measly Rs 113 crore, vis-?-vis NSE?s Rs 48,185 crore.
The other contentious issue is that of BSE?s proposed initial public offer. A section of BSE?s members feels the management is deliberately dragging its feet on an IPO since that will make the exchange more transparent. On the other hand, sections within the BSE management say the exchange is already in discussions with Sebi on listing its shares with or without an IPO.
Sebi chairman CB Bhave, who is being briefed regularly on l?affaire BSE, has his task cut out. Bhave, who has headed Sebi?s secondary market wing for years in his earlier stint, has seen all this and more. Jagdish Capoor, another well-regarded financial sector person, has succeeded Datta as the new BSE chairman. But Sebi will now have to ensure the unwelcome remnants of the past are finally removed from the BSE and the board is totally unbiased and of global standard, just like the country?s equity markets have now become.
sourav.majumdar@expressindia.com