Bombay Stock Exchange

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

The Bombay Stock Exchange (BSE) is one of the world's largest exchanges and is the largest stock exchange in the number of listings, with more than 5,900 companies registered with it. It is the world's 10th largest stock exchange by market capitalization, which stands at about $1.7 trillion, and the oldest stock exchange in India.[1] The century-old BSE trades shares and derivatives, and publishes India's equity benchmark SENSEX.

The BSE ranked 13th in global exchange volume in 2016 with more than 543 million contracts, down 11.7 percent from the previous year, according to the Futures Industry Association annual volume survey.[2]

After demutualizing, the exchange held an initial public offering in January of 2017 and debuted at Rs 1,085 on the National Stock Exchange of India (NSE), its biggest rival, on February 3, 2017, surging 33 per cent over the issue price of Rs 806.[3] [4]

The funds raised through the IPO will go to the 9,000 or so existing BSE shareholders, including the Singapore Exchange, the Mauritius-based arm of American investor George Soros’s Quantum Fund, and the foreign fund Atticus. Together, BSE diluted stake worth 28 percent.[5]

The exchange had announced plans for an IPO in 2013 but was delayed by the Indian regulator, Sebi.[6] It received approval from Sebi in March of 2016,[7] and in June of 2016 shareholders approved its proposed IPO plan.[8]

Deutsche Boerse and Singapore Exchange are BSE's strategic partners and shareholders, with a 5 percent stake each. Deutsche Boerse bought its stake in BSE in 2007 and announced a technology alliance in 2013 that led the BSE to move its equity and derivatives platforms on to Deutsche Boerse’s N7 trading network. [9] Its domestic shareholders include Life Insurance Corporation of India, State Bank of India and Bajaj Holdings and Investment Ltd.

Foreign investors such as Canada-based investor Thomas Caldwell’s Caldwell India Holdings Inc. and US fund Argonaut Private Equity are also investors in the exchange.

On November 1, 2016, BSE received Sebi's approval to set up international exchange and clearing corporations at GIFT city, an under-construction central business district in the Indian state of Gujarat. BSE plans for the exchange to be operational by early 2017.[10]

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.[11] The BSE's closest competitor in India's equities market today is the more technology-focused National Stock Exchange of India (NSEI).

In August 2009 the BSE announced it was taking a 15 percent interest in India's newly-formed United Stock Exchange (USE), which planned to list financial derivatives such as interest rate futures.[12] Several weeks after the announcement the BSE gained approval from SEBI to list its own interest rate futures contracts.[13]

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.[14] 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.[15]

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. [16]

Contract Volume

Year Total Annual Volume* Percent Change
2016 543,058,508 (-) 11.7% 2015 614,894,523 (-)18.6%
2014 725,841,680 184.8%
2013 254,845,929 4.6%
2012 243,757,257 7879.5%
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.[17] [18]

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.[19] 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.[20]

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.[21] 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.

In November 2013 BSE launched a suite of currency derivatives that had significant success in building liquidity.[22]

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.[23] The deal received approval from the Competition Commission of India and the Securities and Exchange Board of India (SEBI).[24]

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.[25]

References

  1. BSE makes stellar debut at NSE. The Times of India.
  2. FIA Annual Volume Survey 2016. Futures Industry Association.
  3. BSE makes stellar debut on NSE. The Times of India.
  4. The week that was: BSE gives IPO mart a great start, but cash ban hangover stays. The Economic Times of India.
  5. BSE IPO: 142 years after taking roots under a banyan, Asia’s oldest stock exchange hits the capital market today. Quartz India.
  6. BSE to sell up to 30% stake by FY17-end. Livemint.
  7. BSE plans to sell up to 30% stake in IPO. CNBC.
  8. BSE shareholders okay IPO plan. Business Standard.
  9. Deutsche Boerse to Invest in India Stock, Commodity Markets. Bloomberg.
  10. BSE gets Sebi's in-principle approval for global exchange. Business Standard.
  11. BSE should set its house in order before listing, says Sebi. Business Standard.
  12. Key Statistics - Business Transacted at BSE. Bombay Stock Exchange.
  13. BSE receives SEBI approval to launch Interest Rate Futures. Bombay Stock Exchange.
  14. Introduction. Bombay Stock Exchange.
  15. The 5 Best Performing Stock Markets In The World In 2014. Bidness Etc..
  16. Sensex to carry S&P tag. Live Mint.
  17. BSE Seeks Approval for Mid-Month Derivatives Products. Wall Street Journal.
  18. Stock Futures. Bombay Stock Exchange.
  19. BSE announces launch of a new index - BSE IPO index. Bombay Stock Exchange.
  20. BSE receives SEBI approval to launch Interest Rate Futures. Bombay Stock Exchange.
  21. Press Release. Eurex.
  22. Technology Drives Bombay Stock Exchange’s Growing Market Share in FX Derivatives. Forex Magnates.
  23. BSE shareholders approve deal with USE. FOW.
  24. BSE Shareholders approve BSE-USE merger. BSE.
  25. Press Release. OIC.