Mumbai : In an effort to increase volumes in its equity cash and derivatives segments, BSE has rolled out some new strategies under the leadership of Sundararaman Ramamurthy, who took charge of Asia’s oldest exchange in January. In the derivatives segment, BSE on Monday relaunched futures and options on Sensex and Bankex expiring on Friday instead of Thursday, so as not to compete directly for volumes with its larger rival.
“The size of our Sensex contracts is small 6 lakhs as compared to 9 lakh on Nifty, which makes it cheaper for traders and investors,” Ramamurthy, MD & CEO, BSE, said in an interview.
BSE tried hard for two decades to gain market share in derivatives, but without success. It had launched a liquidity enhancement scheme under which members were encouraged to offer two-way quotes – buy and sell – but these measures did not work, resulting in the exchange withdrawing them and allowing the exchange to turn the tide. Focused on redesigning contracts.
The difference between smaller rival NSE and BSE is borne by the equity derivative volumes on the two exchanges. The average daily turnover (ADT) of the derivatives segment on BSE was 1.38 trillion in FY23. NSE’s ADT was strong against this 153.5 trillion over the same period.
BSE has re-launched weekly as well as monthly index futures and options. NSE currently runs monthly index futures and weekly index options.
Again the difference in turnover on the equity spot or cash market is clear. As against BSE’s market share of 7.2% in FY23, NSE had about 93% market share.
In FY23 in absolute terms, the average daily cash volume on BSE was 4,132 crore while it was on the NSE 53,434 crores.
To increase market share to at least 10%, Ramamurthy is tying up with domestic institutions to drive volumes on his platform.
“Out of a total of 900 active members on BSE and NSE, it calls upon each member to increase the volume 2 crore, which is not much sought as we look to deepen liquidity through measures that cut impact cost of business.”
Impact cost is the cost that an investor bears when executing a transaction in a given security.
Other measures to reduce impact costs and increase turnover include BSE reducing the tick size on certain stocks. The tick size is the minimum price an exchange-traded asset can move.
For example, data shows that BSE has reduced the tick size to 1 paise for stocks priced below 100 from March 1. Earlier, BSE had only 1 paisa tick for stocks below 15.
1 paisa tick size change has helped in driving up the ADT of these stocks 513 crore (14% of total ADT) in February 540 crore (14.7%) in March and 603 crore (20%) in April. Incidentally, Ramamurthy had served as a senior member of the NSE team since its inception in 1992, besides working as MD and Chief Operating Officer at the Indian branch of Bank of America before joining BSE. did.
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