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Staggering BSE stocks propel 30 brokers to exit
By siliconindia
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Monday, 29 December 2008, 20:04 IST
Bangalore: The severe drop in the Bombay Stock Exchange (BSE) stocks triggering the crash of India's equity business propelled around 30 stock brokers to make an exit in the current fiscal. The daily turnover of the derivative business on the exchange has drastically come down to 
85 lakh (8.5 million) from 2,000 crore (20 billion).
Among the overall 300 brokers in this segment, not even 10 percent are active. "Although there is no business in the futures segment on the National Stock Exchange (NSE), we still pay margins so that we are ready to take opportunities when there is activity. But incurring costs for this on the BSE is useless since hardly anyone trades in derivatives there," said a broker to Business Standard. Every broker has to deposit margin money, depending on which they are given a trading limit by the stock exchange. Large brokerage houses mainly raise this money through debt placement at high interest rates. Thus, the move to withheld participation in BSE is considered to be a cost cutting measure.
The NSE is mainly able to generate volumes because most large institutional investors prefer this exchange. On the BSE, on the other hand, a major chunk of the volumes has mainly come from block or bulk deals in the cash segment. However, in this segment the daily turnover has declined from $18 billion to $4 billion. So, market players are of the view that it would be tough for the NSE to maintain its leadership in the equity space with new players emerging like Financial Technologies. The promoter of the Multi Commodity Exchange is setting up infrastructure for an equity exchange after it successfully launched a currency derivatives exchange, MCX SX, recently. MCX SX, which went live nearly a month after the NSE launched currency futures trading, is already neck-and-neck with the NSE in terms of turnover and volumes.
85 lakh (8.5 million) from 2,000 crore (20 billion).
Among the overall 300 brokers in this segment, not even 10 percent are active. "Although there is no business in the futures segment on the National Stock Exchange (NSE), we still pay margins so that we are ready to take opportunities when there is activity. But incurring costs for this on the BSE is useless since hardly anyone trades in derivatives there," said a broker to Business Standard. Every broker has to deposit margin money, depending on which they are given a trading limit by the stock exchange. Large brokerage houses mainly raise this money through debt placement at high interest rates. Thus, the move to withheld participation in BSE is considered to be a cost cutting measure.
The NSE is mainly able to generate volumes because most large institutional investors prefer this exchange. On the BSE, on the other hand, a major chunk of the volumes has mainly come from block or bulk deals in the cash segment. However, in this segment the daily turnover has declined from $18 billion to $4 billion. So, market players are of the view that it would be tough for the NSE to maintain its leadership in the equity space with new players emerging like Financial Technologies. The promoter of the Multi Commodity Exchange is setting up infrastructure for an equity exchange after it successfully launched a currency derivatives exchange, MCX SX, recently. MCX SX, which went live nearly a month after the NSE launched currency futures trading, is already neck-and-neck with the NSE in terms of turnover and volumes.