The solid profits being made by the National Stock Exchange, or NSE (as shown in Table 1) seem to have lured many players into the exchange business. NSE and the two other new players, MCX and NCDEX, have all seen a slight rise in revenues over the past financial year. The Bombay Stock Exchange, once the monopolist, saw its revenues continue to shrink.
The growth of the national exchanges comes with the demise of local stock exchanges across the country. Table 2 outlines what has happened over the past decade: turnover in most cases has shrunk to nothing, though the exchanges continue to exist statutorily. The Calcutta Stock Exchange continues to hold on, albeit with much-reduced numbers.
Steady profits are also being made by settlement organisations such as the Central Depository Service, the National Securities Depository and the Clearing Corporation of India, as Table 3 shows. The National Securities Depository, in particular, has seen revenues increase sharply.
The nature of what is being traded is also of interest. As Table 4 shows, the corporate debt market, in particular, is infinitesimal, much smaller than is warranted by the size of India’s private sector. When turnover is decomposed by source for each exchange, and each month, additional patterns are discernible, as in Table 5. The recent recovery in the BSE’s turnover is of particular interest.(Click here for tables)
Table 6 lays out the composition and change in the number of brokers registered with the market regulator, the Securities and Exchange Board of India. Of note is how the number of sub-brokers in the cash segment exploded between 2005 and 2010. Derivatives brokers also greatly increased in numbers, for both vanilla and currency versions. Markets are growing in profitability, turnover — and complexity.