If you have only one exchange, you have a problem: BSE chief Ramamurthy

New BSE chief bats for competition, at least a duopoly in equity market space

In his first address after taking charge as BSE managing director (MD) and chief executive officer, Sundararaman Ramamurthy said on Friday that it will not be good if only one stock exchange survives.

Focusing on the importance of at least a duopoly in the equity market space, the ex-BofA chief operating officer urged brokers to enhance interoperability between exchanges. Currently, BSE’s rival -- the National Stock Exchange (NSE) -- has over 90 per cent market share in the cash segment and a virtual monopoly in the derivatives space.

Speaking at an event organised by the Association of National Exchanges Members of India (ANMI), Ramamurthy urged brokers to provide intraday interoperability to their clients as mandated by the Securities and Exchange Board of India (Sebi).

“If you have only one exchange which is going to survive, and the other not very vibrant, then you have a problem in hand,” said Ramamurthy.

“We should be ensuring vibrancy in the market with at least a duopoly or three exchanges. Otherwise we will not be doing service to the market, and technology, which has been a boon, will suddenly become a bane,” he added.

His comments come amidst a declining share of BSE in market turnover and volumes.

 

In 2022, NSE’s share in daily average turnover in the equity derivatives segment stood at Rs 123 trillion or 98.4 per cent while it was only Rs 1.97 trillion for the BSE. In the equity cash segment, NSE holds 92.6 per cent share.

While the BSE has been able to maintain its share in the cash segment over the last three years, its share in the derivatives segment has fallen from 4.7 per cent in 2021 to 1.6 per cent at present.

The BSE MD also said that the broking industry was serving one exchange as the default one to clients and some players were only doing a ‘lip-service’ to the interoperability regulation.

“Only some (brokers) may be providing the capability to the investor to see which is the better exchange to place the order, or to do an intraday buy at one place and sell at the another, whichever is better. Intraday front-end based interoperability is still appearing to be a dream. You are not providing a viable solution to the clients,” Ramamurthy said.

World over, the stock exchange space is seen as a winner-takes-it-all business. This is because higher the volumes, lower is the impact or trading cost. Despite NSE being embroiled in the co-location controversy over the past few years, it has barely ceded any ground in terms of being the more preferred venue for trading in equities.