At a time when the MCX Stock Exchange (MCX-SX), run by Financial Technologies, and the Delhi Stock Exchange (DSE) are struggling to start equity trading, a relatively smaller Navi Mumbai-based Inter-connected Stock Exchange (ISE) is confident of launching cash equity trading in a couple of months.
“ISE has completed internal testing of its trading software and will seek inspection from the regulator in February,” said Managing Director P J Mathew. He said ISE had a deadline to go live with equity trading by the first week of April once the Securities and Exchange Board of India (Sebi) gave its go-ahead. “We are compliant with Sebi norms in terms of diversification of shareholding and have a licence for equity trading. The regulator has to only inspect our trading platform infrastructure and risk management systems,” said Mathew.
ISE has Tata Consultancy Services as technology partner for clearing, trading, settlement and other software-related needs. The exchange plans to get all the most-traded companies on the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) on its platform, under the permitted category rules of the Securities and Contract Act. Under the rules, shares of companies listed on other stock exchanges can be traded on ISE, on request. However, the decision to list is left to the companies.
If ISE is able to launch operations this year, it will be significant, in the backdrop of a massive battle between the MCX group and Sebi over regulations governing stock exchanges. Also, Sebi has not allowed the Delhi Stock Exchange, in which Financial Technologies holds five per cent, to launch equity trading. The matter is stuck over trading infrastructure and risk management issues.
Background
ISE was started in 1998 when only BSE was considered a pan-India exchange. However, it was defunct as equity trading volumes and participation by retail investors dried up after a slew of scams hit the stock markets. ISE was de-mutualised in 2007. Then, it was valued around Rs 35 crore. The exchange had sold 870,000 shares of Rs 1 face value to private companies, regional stock exchanges and individual investors at Rs 250 a piece.
Apart from 13 regional stock exchanges which hold 47.28 per cent stake in ISE, other big shareholders include Bennett, Coleman & Co, publishers of The Times of India; Mumbai-based stock broker and bond dealer, Darashaw & Co; Religare Technova and leading gold trader Prithviraj Kothari of Riddhi Siddhi Bullion. Each of them hold five per cent or less. The wife of another top stock trader, O M Damani, holds one per cent.
The current net worth of ISE is Rs 70 crore and the exchange has a corpus of Rs 35 crore to fund its working capital needs for the next two years, says Mathew. The exchange’s licence was recently renewed by Sebi till November 2011.
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Trading members of ISE will have to make a re-refundable deposit of Rs 4,00,000, with an admission fee of Rs 50,000. This is less than BSE’s membership deposit of Rs 10,00,000. ISE also plans to keep trading charges lower.
The exchange has 2,500 trading terminals across the country through its 100 per cent subsidiary, ISE Securities and Services. ISE has 811 stock brokers registered with it, of which 420 are sub-brokers. At present, these brokers trade on NSE and BSE. “Once ISE starts trading, the valuation of regional stock exchanges that are our shareholders will go up,” said Mathew.
On an average, equity derivatives of Rs 1,00,000 crore are traded on NSE daily, while the combined cash equity volume on BSE and NSE is between Rs 15,000 and Rs 20,000 crore. There is an opportunity for other exchanges as volumes are likely to double in the next couple of years. Other products such as currency and interest rate futures will also gain popularity, say market players.
| Correction The Delhi Stock Exchange (DSE) has clarified that the Securities and Exchange Board of India (Sebi) has allowed it to start equity trading on its platform and the infrastructure is in place. The clarification is in response to a report published in Business Standard on January 21 (ISE set for equity trading by April'), where it was wrongly stated that Sebi had not allowed DSE to launch equity trading. The error is regretted. |