<b>BSE:</b> A Journey in Time

As BSE gears up to list its shares, it is easy to forget Asia's oldest bourse had a humble beginning

When a group of stockbrokers began trading in 1875 under the banner The Native Share and Stock Brokers’ Association, little did they know that the arrangement would mature into one of the premier stock exchanges of the country: BSE, formerly the Bombay Stock Exchange. Indeed, as the exchange gears up to list its own shares, a decade after its demutualisation, it is easy to forget that Asia’s oldest exchange had a humble beginning.

In the 1850s, meetings of stockbrokers were held under a banyan tree in front of the Town Hall, which is in south Mumbai. After trying makeshift locations, the brokers settled on a permanent place called Dalal Street (Brokers' Street) in 1874.

As the number of brokers swelled, they moved to their own building in January 1899, named after Dinshaw Maneckji Petit, founder of the first textile mill in India. The construction of the iconic 29-storeyed Phiroze Jeejeebhoy Towers began in the 1970s and was occupied by BSE in 1980. It is also easy to forget that until the mid-1990s traders relied on the open outcry system to buy and sell shares. It was common to see brokers lugging wads of papers around — unsurprising, as transaction records were kept in the form of physical share certificates. “It was an animated chaos and the ability to handle high volumes was limited,” says Alok Churiwala, a third-generation stock broker and former vice-chairman of the BSE Brokers Forum.

Mumbai was not the only trading hub. Chennai, Delhi, Ahmedabad and Kolkata were the other active stock exchanges. There were line brokers, whose sole job was to be in touch with these centres and get the latest share price details.

The trading community comprised almost solely Gujaratis and Marwaris then. Because of the prevalence of floor trading, brokers had to remain within a kilometre of the exchange. The proximity forged strong relationships among brokers and, to some extent, explains their affinity for BSE, a fact alluded to by the exchange’s current chief, Ashishkumar Chauhan, during the IPO conference last week. 

The exchange had a false start when it adopted technology. In the late 1980s, apparently, its attempts to procure computers were unsuccessful owing to a dip in India’s foreign exchange reserves and US sanctions on India. That was a temporary setback. In 1995, with the arrival of the rival National Stock Exchange, BSE too adopted an automated, screen-based trading system called BSE On-Line Trading (BOLT) with a capacity of eight million orders per day. In 1999, the Central Depository Services (India) (CDSL) was set up. “Back in the 1980s, it could take up to six minutes to execute an order; now the time is down to six micro seconds,” observes Churiwala. 

The exchange has been quick to adapt to regulatory changes also. In 2004, the Securities Contracts Regulation Act (SCRA), 1956, was amended to make way for the corporatisation and demutualisation of stock exchanges. In 2005, BSE morphed into a corporate entity with the separation of ownership and management from trading rights. In 2007, the demutualisation process was completed after the exchange sold its 51 per cent stake to 21 investors, including high net-worth individuals such as Kris Gopalakrishnan and NS Raghavan of Infosys Technologies.

Despite increasing completion, BSE and the image of its iconic Jeejeebhoy Towers have remained synonymous with the satta bazaar. Indeed, the exchange’s benchmark 30-share Sensitive Index, or Sensex, has mirrored changes in the economy in the past 39 years and has come to be known as the market bellwether since it was created in 1986. “Investors who bought stocks 20 or 30 years ago would have purchased it at BSE,” points out Churiwala.

While the brand remains intact, the road ahead is not smooth. The exchange is a bit player in the equity derivatives segment, while it maintains a double-digit share in the mainstay cash business. New businesses such as currency derivatives, however, offer hope. “BSE is poised for growth,” says Kisan R Choksey, chairman of KR Choksey Shares and Securities, whose relations with BSE date from 1961. “If the economy does well and more professionally-run companies get listed, volumes are bound to increase,” he reasons.

And while the jury is out on whether the bourse can regain its lost glory, new investors buying into the exchange will hope their returns are better than the ones who came in about a decade ago.

ROAD TO LSITING

Jul 9, 1875: The Native Share and Stock Brokers’ Association formed 

Dec 3, 1887: Execution of indenture constituting the articles of association on the exchange

Feb 2, 1921: Clearing House started by Bank of India

Oct 29, 1925: The Bombay Securities Contracts Control Act, 1925, enacted

Jan 2, 1986: Sensex, country’s first equity index, launched

May  1, 1992: Sebi Act implemented (an Act to protect, develop and regulate the securities market) 

1992: Securities Appellate Tribunal (SAT) established

Mar 14, 1995: BSE online trading system introduced

Mar 22, 1999: CDSL set up with other financial institutions

Mar 1, 2001: Corporatisation of exchanges proposed by the government

Apr 1, 2003: T+2 settlement introduced

Feb 14, 2007: Deutsche Börse enters into an agreement to invest five per cent stake in BSE

Jul 8, 2011: Name changed from ‘Bombay Stock Exchange Ltd’ to ‘BSE Ltd’.

Nov 28, 2014: BSE-listed companies’ market cap crosses Rs 100 lakh crore

July 9, 2015: BSE completes 140 years of operations

Jan 3, 2017: Sebi nod for IPO

Source: Exchange

Source: Exchange