A decision made at the 11th hour by the National Stock Exchange (NSE), to allow trading of Multi Commodity Exchange (MCX) shares on its platform, has tilted the scales in its favour. NSE stole a march over rival Bombay Stock Exchange (BSE), as it ended up cornering a larger pie of volumes generated by MCX, which was initially to be listed only on BSE.
Any large chunk of share deal is extremely important for BSE, as its cash turnover is just around Rs 3,000 crore on an average daily basis, compared to NSE’s Rs 12,000-13,000 crore. Both exchanges are lobbying intensely for block deals, and any initial public offer (IPO) with high demand is a perfect opportunity in such a scenario.
Recently, the Rs 9,300-crore ($ 1.9-billion) block deal of HDFC shares, where Citi Group offloaded its stake, was executed on NSE. Earlier in 2011, the Rs 12,000-crore block deal where Vedanta, along with group companies, bought Cairn India shares, was struck on BSE.
Similarly, huge trading interest was expected in MCX shares post-listing as the Rs 660-crore IPO was overbid 54 times, generating demand for Rs 36,000 crore worth of shares.
However, MCX had proposed to list only on BSE initially, as it is at loggerheads with the management of NSE over several issues. But this could have resulted in huge loss of volumes for NSE, which issued a circular on Thursday to allow MCX to trade on its platform under the ‘permitted securities’ category. Under this category, an exchange can add a scrip to its trading platform from any rival exchange, even if the company has not applied for listing on its platform. But the compliance part has to be taken care of only by the exchange where the company has proposed to list.
About Rs 1,865 crore worth of MCX shares were traded on NSE and BSE together, of which the former’s market share was 56 per cent. On NSE, MCX shares worth Rs 1,062 crore were traded while trades worth Rs 803 crore took place on BSE. Stock exchange officials said NSE’s decision was a loss for BSE as volumes got divided between the two exchanges, which otherwise could have given BSE a leverage.
“Apart from NSE, there were trading members who were concerned at losing out on the brokerage fee from traders in MCX counter. NSE members put pressure on the management and requested it to allow trading of MCX shares,” said the head of the institutional desk at a Mumbai-based broking firm.
NSE is the country’s largest exchange with an average daily turnover of around Rs 1,50,000 crore in equity derivatives and cash, combined. However, trading interest on BSE’s platform was growing after the launch of a market-making scheme, and if volumes sustain post the scheme it could become a cause of concern for NSE.
The NSE circular dated March 7 said MCX will trade on NSE’s capital market segment from March 9, the day of its listing on BSE. This means MCX is under no obligation to comply with NSE’s rules for listed stocks and also the listing agreement, including filing of annual reports, notices and press releases.
