BSE mulls CSE entry to shore up F&O volumes

The Bombay Stock Exchange (BSE), to improve its revenues ahead of a proposed 26 per cent stake sale to a strategic partner, is exploring ways to revive its futures and options (F&O) business.

A key proposal under consideration is to allow its F&O trading terminals on the now-defunct Calcutta Stock Exchange (CSE).

Currently, the National Stock Exchange (NSE) logs in trades worth Rs 20,000 crore in F&O on a daily basis, while BSE's F&O segment has been a non-starter.

CSE members, who also have NSE memberships or sub-brokership, contribute 15-20 per cent to its derivatives turnover. BSE expects these members to switch over to its F&O terminals if given some concessions.

Sources said at a meeting of BSE members held on Friday, the proposal was discussed and it was felt that it will be a win-win situation for both the exchanges.

While BSE would be able to revive its derivatives segment, the Lyons Range could benefit from the lifeline extended by Asia's oldest stock exchange.

The CSE, which was shut down after a payment crisis of 2000, is currently run by the Securities and Exchange Board of India (Sebi) with no trading activity. It is learnt that the proposal has the blessing of the market regulator.

In fact, a Sebi report on regional stock exchanges has also recommended steps to revive ailing regional bourses.

Rajnikant Patel, managing director and CEO of BSE, said, "Discussions with CSE are at a preliminary stage." On whether BSE would waive off transaction costs on F&O for a brief period to kick up volumes, Patel said, "We have to come up with a solution (in F&O)." In cash segment, however, BSE has completely ruled out any concessions for CSE.

In futures, transaction costs amount to Rs 2 per lakh of turnover plus 0.0001 per cent for investor protection fund. In options, transaction costs are set at 0.05 per cent on the premium value plus 0.001 per cent on the premium amount.

Vijay Kedia, managing director of Kedia Securities, and a member of CSE, said if the move clicks, CSE ticket, which has no value now, would also fetch anywhere between Rs 8 and Rs 12 lakh.

A major hitch, however, is the Rs 10 crore deposit sought by the BSE for installing its trading terminals at CSE. Kedia said about Rs 25-30 crore of CSE members' money is blocked after the payment crisis and a part of that money should be used for paying the BSE as suggested by CSE members.

It is learnt that CSE top brass is in favour of members contributing to the deposit fees. Also, it was told that the proposed new BSE trading facility would be available only for those members who join the scheme at the starting stage itself and would be open only to existing CSE members. New members cannot avail of this scheme.

The BSE, which is the midst of a demutualisation, is looking for a strategic partner to divest 26 per cent stake before December 31. Reportedly, several global exchanges have evinced interest in picking up a stake.

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NEW PLANS

CSE members, who also have NSE memberships and contribute 15-20% to NSE's F&O turnover, are expected to switch over to BSE's F&O over a period of time, if given concessions

THE MOVE will help BSE to revive its F&O segment while the Lyons Range could benefit from the lifeline extended by BSE