While regional stock exchanges are slowly losing their relevance, the Bangalore Stock Exchange (BgSE) is trying to reinvent itself by tying up with a foreign exchange in future. The regional bourse is also conducting investors’ awareness programme in its bid to popularise the exchange in Karnataka. In a freewheeling chat with Debasis Mohapatra, C Subramaniam, chief operating officer of BgSE, discusses the challenges and opportunities for the exchange. Edited excerpts:
What is the current volume of BgSE?
Volumes are nil per se, but our subsidiary company is a trading member of both the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). In turn, our members are the sub-brokers of the subsidiary company and are trading on the BSE and the NSE. The present trading volume is Rs 70-80 crore per day through this subsidiary.
In the wake of falling relevance of regional stock exchanges, what is your plan for BgSE?
We are trying to tie up with a foreign stock exchange. We are in talks with them. Simultaneously, we are also exploring the possibility of tying up with the NSE and the BSE under Section 13 for facilitating trade from our exchange.
What is the advantage of a tie-up with a foreign bourse?
Foreign stock exchanges are technologically advanced. They have world-class state-of-the-art and cutting edge trading platform software. They have supplied their trading platforms all over the world. So, if they come as a strategic partner, they will bring the technology with them. Further, we will also get to know the best practices available in developed countries in terms of surveillance, compliance, market operations, clearing & settlement functions, risk management, etc.
What will be the extent of dilution if a foreign exchange comes on board?
There won’t be significant dilution and the strategic partner will be a minority shareholder. Today, a domestic strategic investor can invest up to 15 per cent, but foreign stock exchanges can hold only five per cent. As far as the shareholding pattern of the exchange is concerned, public investors hold 60 per cent and the rest lies with our 254 trading members.
Will volume increase after the tie-up?
We are hopeful of witnessing an upward trend in trading volumes after the tie-up. Though there will be some constraints with respect to the size and the depth of the order book in the initial phase, we hope subsequently it will pick up. As our daily trading volume is around Rs 80 crore though the subsidiary, we expect around Rs 50 crore volume from our trading platform in the initial days.
If you tie up with the NSE and the BSE, what will be the advantage to your trading members?
The transaction cost of our trading members is expected to come down by 50-60 per cent from the current level. This will certainly help our existing trading members and if it is passed on to customers, it will attract more customers to the exchange.
After the new partner comes on board, what new facilities will be provided to members? When do you expect it to be profitable?
Initially, we will provide trading platforms in equity and debt. Other facilities like currency futures and other derivative products will be available over a period of time of one to two years. Regarding profitability, the BgSE is profitable as of now. However, it will take two-three years to attain break even after the new trading platform starts.
What is the annual revenue of the exchange? Will you please specify the sources?
For the year ended March 2010, annual revenue was reasonably good and the major chunk came from rentals, interest income, dividend income, listing fees, etc.
Are you doing any branding exercise to spread awareness about the exchange?
We regularly hold investors’ awareness programmes and we have 18 investor service centres all over the state. As a regional exchange, our reach is very sound in different parts of the state and we want to cash in on this. According to available statistics, only two per cent of Indian population invest in equities, so there is a large scope for regional exchanges.
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