The 7-year old National Stock Exchange has pipped the 125-year old Bombay Stock Exchange (BSE) in the turnover sweepstakes during the 11 months of calendar 2001.
BSE's share of the turnover in the capital market works out to 23.4 per cent against NSE's 76.6 per cent of the aggregate turnover of the exchanges during January-November. The aggregate turnover includes volumes in cash, derivatives and debt segments.
On an aggregate, the two major exchanges generated volumes of Rs 19.07 trillion in the three segments during the 11 months, with NSE's share at Rs 14.61 trillion and the BSE's at Rs 4.47 trillion.
BSE is already struggling to generate volumes in derivatives and debt market. On the contrary, NSE's fortunes are thriving just because it has been able to monopolise trading in these two segments.
In October and November, BSE's turnover in derivatives accounted for a mere 1 per cent of the total traded volumes. BSE authorities are not willing to disclose the volume of turnover in the debt market, but its shares in derivatives has been abysmally low at 6.50 per cent.
BSE's turnover in November accounted for 1.4 per cent of the total derivatives turnover of Rs 8,880 crore. In October, it accounted for 1.1 per cent of the combined derivatives turnover of Rs 5,596 crore. And there is where the action is. The NSE has reported a whopping 248 times increase in turnover from Rs 35 crore in June to Rs 8,760 crore in November.
Against this, the BSE managed a modest doubling (114 per cent increase) in turnover to climb from Rs 56 crore in June 2001 to Rs 120 crore in November. As a result, the NSE at present controls 99 per cent of the combined derivatives turnover.
The BSE controlled 61 per cent of the nascent combined business of Rs 94.20 crore in June 2000. But its hold slackened after the markets regulator sacked the governing board of the exchange.
Without a proper board at the helm, the BSE's share in the total derivatives business dipped from 35 per cent in February 2001 to 20 per cent in March 2001.
In June and July, the exchange's derivatives business fell to a mere 2 per cent and 5 per cent, respectively of the combined turnover.
Commenting on the issue, BSE sources said, "The exchange has taken initiatives for a better performance by increasing its network outside Mumbai, consolidating regional exchanges and incorporating incentives for trading in derivatives at BSE."
Market experts attribute the downslide of business to two main reasons. One is the regulator's decision to bar sub-brokers from trading in derivatives; these sub-brokers contribute heavily to the BSE's cash market business.
Second, is the BSE's inward looking approach in recent years. Currently, the NSE has 944 trading members, of which 263 members are active in the derivatives segment. The exchange has 2,809 V-Sats spread out in 376 cities. Of this, 642 are located in Mumbai, Delhi (399) , Kolkata (174), and Ahmedabad (81). The BSE has a total of 173 members in the derivatives segment.
With a huge network and better volumes, NSE has become a national player, while the BSE has remained Mumbai-centric in derivatives, opines an exchange member.
With the promise of greater liquidity--and thereby, lower transactions costs--institutional players have taken their business entirely to the NSE.
This has reinforced the NSE's lead in volumes and market share leaving the BSE with an impossible task of catching up.
