Regulator to open gate for more market intermediaries
The markets regulator on Wednesday proposed to ease ownership norms for entities that plan to start new stock exchanges in India, a move that may end the 16-year-long dominance of the National Stock Exchange of India Ltd, allow entry of foreign exchanges and lower the trading and lower costs for investors.
Currently, NSE, BSE and Metropolitan Stock Exchange are the three nationwide bourses in India, with NSE being the largest in terms of trade volumes both in cash and derivatives segments. Though BSE is Asia’s oldest bourse, almost all equity derivatives business in the country happens on NSE’s trading platform.
The reason behind the migration of trading to NSE was the exchange’s better technology and the absence of legacy issues that had plagued BSE.
“The Indian securities market has witnessed dominance in trading and depository space, raising concerns on the possibility of excessive concentration and institutional tardiness in quickly responding to the changing market dynamics which may have an adverse bearing on efficiency in trading, record-keeping, supervision and risk management practices,” Sebi said in a discussion paper.
Even though NSE has been dominating the exchange business, it has faced several technical glitches, causing unexpected market crashes and losses to investors. Sebi is also probing a case of certain algorithmic traders unfairly benefiting from priority access to the NSE platform.
A review is crucial to facilitate new entrants to set up stock exchanges or depositories, Sebi said. The proposals, if implemented, will allow foreign exchanges to enter India either through joint ventures with a new domestic entity or through mergers with existing stock exchanges. The proposed norms will also allow new companies to acquire existing exchanges or facilitate mergers of existing exchanges and depositories.