Although an initial public offering (IPO) from the Bombay Stock Exchange (BSE) doesn’t look imminent, its investors are a lot more upbeat about the initial actions of Madhu Kannan, the new chief executive officer. For the first time ever, the BSE has a senior management team whose combined international experience surpasses that of any other bourse or even the regulator. The team comprises James E Shapiro (formerly at the NYSE), head of market development, Dr Sayee Srinivasan (from the Chicago Mercantile Exchange) and Nehal Vora (formerly at DSP Merrill Lynch) to head planning and policy. The difference is already apparent to market watchers. In the past couple of years, the BSE had little to contribute at SEBI meetings; it had even been dropped from some committees giving the National Stock Exchange an overwhelming influence on policy. Now, the BSE often has a strong presence and is being heard. Its currency derivatives exchange – the BSE SX-- went defunct soon after it was launched, but is being rejuvenated and has reportedly attracted four banks as new members.
With BSE raring to go and waiting to increase turnover and MCX working hard for permission to enter the equity markets, the stage is set for some genuine competition in the capital market. But the regulator may need to make some changes to encourage innovation to foster healthy competition while remaining strongly focused on regulation and supervision. For starters, it needs to come up with clear rules for self-listing as well as fair play rules to ensure smooth listing on rival bourses. As far as product innovation is concerned, only the NSE had been allowed to do it with the Advance Lending Borrowing Mechanism (ALBM), which came under stringent scrutiny by the Joint Parliamentary Committee following the Ketan Parekh scam. While media reports have suggested that the BSE has sought permission to launch a version of the ALBM, the fact is that SEBI does not, as a policy, offer product exclusivity to bourses. Will SEBI change its policy when we have three aggressive exchanges fighting for market share? Possibly; but we at Moneylife would much rather see the bourses working at market expansion through investor education, investor protection and better grievance redressal rather than merely increasing market share.
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