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  • Will BSE as an Exchange Die? 1
  •  Will BSE as an Exchange Die?


    The new system of cross margining between the cash and the F&O (derivatives) segments that Sebi is putting in place *would impart all important liquidity for liquidity thirsty markets, and they are thirsty alright the combined daily trading volumes on the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) have dropped at least 56% since the beginning of this year, this is a welcomed move as margin’s required for trading are calculated depending on volatility of an index and VIX, the Volatility Index has been very high, for instance earlier this year the margin requirement for trading in Nifty futures was 10-15% now it has gone up to 25%.

    While this move of allowing cross margining** between the cash and the derivatives segments i.e. treating the risk margining on a basket basis rather than on a individual basis makes business and economic sense as its great news for brokers and traders, in terms of boosting the volumes. Some experts say the oldest bourse in Asia might be on verge of extinction. As the derivative segment of BSE is not as developed as NSE, and it’s clear NSE is the main beneficiary out of the two.

    But BSE are prisoners of their own device, and the situation they are in place right now is due to their own lethargic (for lack of a better word) actions. For instance in 2007-08 the value of share delivered in BSE in cash segment was 476,196 Cr, and that on NSE was almost twice 970,618 Cr .Many examples can be cited where BSE never capitalized and seized the moment. The biggest issue which BSE faces is, lack of proper and deep derivatives market, as a result they not only loose revenues by not having strong F&O market, but also lose the arbitrageurs who bring in the volumes. The Oldest Asian bourse wanted to introduce currency derivatives, but got delayed, and NSE was first to jump on the button. The BSE has come out from the regime in which few brokers on Dalal Street controlled majority stake in the exchange, and were more keen on milking the fat cow for making their own cheese to taste sweet, but still can we say that Is BSE completely demutualized in true sense of the word. BSE has to dig deep within and get some answers and do it fast before it’s too late.

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