Bombay Stock Exchange

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Bombay Stock Exchange
BombayStockEx.jpg
Founded 1875
Headquarters Mumbai (formerly Bombay), India
Key People Madhu Kannan
Products SENSEX benchmark and other indices
Website http://www.bseindia.com/

The Bombay Stock Exchange (BSE) is one of the world's largest exchanges. The century-old BSE trades shares and derivatives, publishes India's equity benchmark SENSEX and is currently seeking to list its own shares on the exchange following its previous demutualization. Its shares were targeted for acquisition in early 2010 by a number of well-known foreign investors, including hedge fund billionaire George Soros.

The BSE ranked 17th in global exchange volume in 2013 with more than 254 million contracts, according to the Futures Industry Association annual volume survey.[1]

Deutsche Boerse and Singapore Exchange are BSE's strategic partners.

Background

The BSE was founded in 1875 in what was then Bombay as the Native Share & Stock Brokers' Association and gained permanent recognition in 1956 under the Securities Contracts (Regulation) Act. Following two decades of rapid growth in Indian securities trading and investment the exchange demutualized in 2005 and has continued to expand since. In 2008 the BSE requested permission from regulator the Securities and Exchange Board of India (SEBI) to list its shares on the exchange without an initial public offering (IPO), although SEBI has asked the BSE to improve some aspects of its technology before listing.[2] The BSE's closest competitor in India's equities market today is the more technology-focused National Stock Exchange of India (NSEI).

As of August 2009, the BSE listed the shares of 4,942 corporations compared to 4,700 in December, 2007, while the total market capitalization of those companies hit $US1.09 trillion, or 52.86 trillion Indian rupees.[3] Also in August 2009 the BSE announced it was taking a 15% interest in India's newly-formed United Stock Exchange (USE), which planned to list financial derivatives such as interest rate futures.[4] Several weeks after the announcement the BSE gained approval from SEBI to list its own interest rate futures contracts.[5]

In August of 2012, it became known that the Karachi Stock Exchange (KSE) and Bombay Stock Exchange (BSE) were in advanced stages of discussion regarding cross listing of indices on futures contracts. [6]

In November 2013 BSE launched a suite of currency derivatives that had significant success in building liquidity.

In October 2014 BSE shareholders approved a deal to acquire the exchange's regional rival the United Stock Exchange of India. The USE trades five currency contracts, the most liquid of which is the USD/Rupee option.[7] The deal received approval from the Competition Commission of India and the Securities and Exchange Board of India (SEBI).[8]

Benchmark

The free-floating, 30-stock index known as S&P BSE SENSEX Index is known around the world as India's equities benchmark and is also traded on the BSE as an exchange traded fund called SPIcE and through Barclays Global Investors as an iShares fund called iShares BSE SENSEX India Tracker.[9] It was first calculated in 1986 as a cap-weighted index and was shifted to a calculation based on free float market capitalization in 2003. It is the fourth-best performing stock index in the world, with a return of 22.7% in 2014, after adjustments made for fluctuations against the US dollar.[10]

In February 2013 BSE Ltd formed a joint venture with S&P Dow Jones Indices to manage the bourse's equity indices. After the partnership, BSE’s equity indices carried the prefix S&P and are calculated, disseminated and licensed by S&P Dow Jones Indices. Following the joint venture, BSE’s Sensex was named the S&P Sensex. BSE's wider indices, the BSE-100 and BSE-200, also carry the S&P prefix. [11]

Contract Volume

Year Total Annual Volume* Percent Change World Ranking
2012 243,757,257 (+) 7879.5% 16
2011 ~3,050,000 (est.) -- --

Key People

Ventures

In November 2009, the exchange announced that it would offer single stock futures and options. The monthly derivatives contracts have starting dates and expiration dates at the beginning and end of each month to compete with contracts from the National Stock Exchange, which start at the beginning of the month and expire on the last Thursday of each month.[12] [13]

The BSE also announced in 2009 that it would begin trading an index that tracks the value of initial public offerings on the exchange for two years after the shares' first BSE listing if they meet minimum standards of free-float market capitalization.[14] The new BSE IPO Index will cap each component's wieght of the index at 20% and the index must contain a minimum of eight IPO shares. The BSE had earlier announced it intends listing interest rate futures before the end of 20098 following its acquisition of a stake in the United Stock Exchange of India in August 2009.[15]

On July 14, 2010, BSE and Eurex announced that they would launch futures and options on the BSE's blue-chip SENSEX on Eurex beginning Oct. 4, 2010.[16] The SENSEX Index tracks the daily performance of 30 of the largest and most actively traded companies listed on the Bombay Stock Exchange.

The new contracts are denominated in US dollars and settled in cash. The futures have maturity dates of the three nearest months, and the following March, June, September and December. The expiration dates of the options are in the three nearest calendar months, the next three quarters and two next semi-annual expiries.

Education Services

In early August, 2010, the U.S.-based Options Industry Council and the BSE announced cooperation on educational offerings aimed at Indian investors including sharing online content, case studies, research and white papers promoting the responsible use of options, as well as seminars to be held in several Indian cities.[17]

News

2010

Shares in the demutualized and expanding BSE saw increased demand from global private equity investment groups in the first few months of 2010. After Dubai Financial, LLC announced in March 2010 that it would sell its 4% stake in BSE, investment heavyweights George Soros through Soros Fund Management LLC and Geoge Kaiser through Argonaut Private Equity (called Argonaut Ventures in India) launched competing bids, BusinessWeek reported,[18] although the sale was eventually called off.

Despite that setback, Argonaut Ventures still managed to increase its stake in BSE sufficiently to make the list of the exchange's top-20 shareholders released in May 2010, the Times of India reported.[19] Argonaut now holds almost 4% of BSE's shares and could increase that if the BSE goes ahead with its long-delayed initial public offering (IPO) later in 2010. Meanwhile, renowned Toronto-based exchange investor Thomas S. Caldwell also lifted Caldwell Financial Ltd's stake in the BSE to 4.25% in early 2010, acquiring shares from local brokers and institutional investors, India's Business Standard reported.[20]

In late August 2010, Soros's Quantum hedge fund did agree to purchase Dubai Financial Group's 4 percent stake in BSE. The shares were transferred August 19, 2010, and valued at 375 rupees to 380 rupees ($8.00-$8.15) a piece, which valued the 135-year-old exchange at $800 million to $850 million, an unnamed top BSE official told the Associated Press. Indian law prohibits foreign investors from holding more than 5 per cent in a local exchange.[21]

References

  1. FIA Annual Volume Survey 2013. Futures Industry Association.
  2. BSE should set its house in order before listing, says Sebi. Business Standard.
  3. Key Statistics - Listing and Capital Raised. Bombay Stock Exchange.
  4. Key Statistics - Business Transacted at BSE. Bombay Stock Exchange.
  5. BSE receives SEBI approval to launch Interest Rate Futures. Bombay Stock Exchange.
  6. Press Release. KSE.
  7. BSE shareholders approve deal with USE. FOW.
  8. BSE Shareholders approve BSE-USE merger. BSE.
  9. Introduction. Bombay Stock Exchange.
  10. The 5 Best Performing Stock Markets In The World In 2014. Bidness Etc..
  11. Sensex to carry S&P tag. Live Mint.
  12. BSE Seeks Approval for Mid-Month Derivatives Products. Wall Street Journal.
  13. Stock Futures. Bombay Stock Exchange.
  14. BSE announces launch of a new index - BSE IPO index. Bombay Stock Exchange.
  15. BSE receives SEBI approval to launch Interest Rate Futures. Bombay Stock Exchange.
  16. Press Release. Eurex.
  17. Press Release. OIC.
  18. Key developments for Argonaut Private Equity. BusinessWeek.
  19. New investors grab a share of BSE pie. Times of India.
  20. Kaiser, Caldwell acquire stake in BSE. Business Standard.
  21. Soros buys 4% of Bombay exchange. Associated Press.