The Battle Of The Bourses

With the shadow of the algo-trading scam hanging over the NSE and a recent change of guard at India’s largest exchange, the BSE is looking to turn its younger rival’s setback into an opportunity to claw back market share.

- Jui Mukherjee

THE BSE, FORMERLY the Bombay Stock Exchange, started trading under a banyan tree near the Town Hall of what was then Bombay 143 years ago. In the time since then, the BSE—Asia’s oldest and the world’s 10th largest bourse by market capitalisation—may have been overtaken by its younger rival, the National Stock Exchange (NSE), in market share. But in the past few years, the algo-trading scam and a change of guard in the recent past have caused some setbacks to the nation’s largest exchange, giving the BSE a chance to capitalise on the situation and close the gap in market share between the two bourses. Fortune India sat down for a candid chat with Ashishkumar Chauhan, managing director and chief executive officer of the BSE, to find out how the fastest bourse in the world—with a response time of less than six microseconds—has fared and its road map ahead. Edited excerpts:

How did the BSE lose market share to the NSE? What is it doing to close that gap?

Firstly, this space is highly regulated; we are more regulated than businesses. If you look back, what were the differences between the NSE and the BSE? One was technology; the BSE was not automated but we became automated later. The second was the organisational structure; the NSE had a corporate structure, while the BSE was a cooperative.

The BSE was late to the derivatives game. Typically, one is likely to trade equities at the same exchange where one trades derivatives. So a gap was created. The BSE had basically zero market share in derivatives, currencies, commodities… pretty much everything except a little bit of equities and some initial public offerings (IPOs). The technology wasn’t considered very good. People had pretty much written the BSE off. Why did the NSE become so big? Not on the back of the past but on the back of the new [offerings]. Derivatives played a big role in it.