Sebi sets the stage for new bourses and depositories

The market regulators announced that they will ease the ownership norms for entities, to start new stock exchanges in our country. This is a move that will end the 16 year-long dominance of the NSE or National Stock Exchange.

At the moment, NSE, BSE, and Metropolitan Stock Exchange are three nationwide bourses in India. NSE happens to be the largest in terms of trade volumes when it comes to both cash and derivatives segments. BSE is the oldest bourse in Asia. Almost all the equity derivatives business in India, happen on the NSE’s trading platform.

The reason behind the trade migration to the National Stock Exchange was due to the exchange’s better technology and the absence of legacy issues which had been a problem in BSE. The Securities and Exchange Board of India (Sebi) said in a discussion paper, that the Indian securities market has seen dominance in trading. They spoke about the concerns on the possibility of tardiness in responding to the change that takes place which further affects their efficiency in various activities such as trading, record-keeping, risk management, and supervision.

Although NSE has been dominating the exchange business, there have been many technical glitches that have affected the market and cause losses for investors. Therefore, Sebi has been probing a case of certain algorithmic traders who are unfairly benefiting from this issue.

If the proposals are implemented, it will allow the foreign exchange to enter India through joint ventures and mergers. It will also allow new companies to acquire the already existing exchanges. This will result in an increase in competition which will result in lowering the costs of trading for investors and will attract more investors into the equity market, and lower the various fees such as membership and clearance fees for brokers and other kinds of trading members.

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