BSE-NSE turf war now moves to commodity space

Nothing is inauspicious for the BSE when it comes to grabbing the first-mover advantage over arch rival NSE. When Ashish Chauhan, MD and CEO of BSE, chose to launch commodity trading on October 1, Pitru Paksha (a 16-day lunar period avoided by most businessmen in India for any new venture) was no deterrent.

On the other hand, his counterpart at NSE, Vikram Limaye, postponed the launch of his exchange into the segment until the auspicious days of Navratri.

Limaye may be eyeing a merger with MCX, the nation’s largest commodity bourse, to beat his rival. But Chauhan has followed up on strategy to recruit officials from the same commodity bourse to beef up BSE’s prospects. Nearly a dozen people — including former and current MCX officials — have joined the BSE in recent days.

It is learnt that an NSE-MCX merger, which has been in the works for several months, is being discussed by the boards of both bourses, and an announcement is expected shortly. NSE and MCX did not comment.

“If the merger between NSE and MCX goes through, the battle will be over before it could start,” said a former regulatory official. “BSE then will have an uphill task to beat NSE.”

NSE is a leader in equity futures with near-100 per cent market share. MCX boasts volumes in bullion, base metals and crude oil, and the largest traded commodity contracts in India. The No 2 commodity bourse, NCDEX, is a distant player in terms of turnover and has been struggling with its agri-commodity trading for years now.

Chauhan has not shown any interest in buying a stake in MCX citing steep valuations though he was approached by the latter’s bankers and shareholders. Instead, he roped in PK Singhal, former CEO of MCX, to advise BSE on its commodity foray. Singhal is known to have closely worked with Jignesh Shah, founder promoter of MCX, in various roles, and was often a key figure in carving out policy matters with regulators and government officials.

Sameer Patil, another MCX veteran, has been a catch for BSE. He joined the bourse as Chief of Business Development, Commodity, and roped in a few others from MCX.

Former exchange officials say that while NSE will try to steer the merger amidst raging investigation and adjudication with regard to an algo trading scam in equity futures, Singhal’s task at BSE is cut out. He will mainly try to push SEBI to streamline norms under which MCX has so far enjoyed regulatory arbitrage. For instance, trading in some metal contracts cannot pick up at other exchanges unless the same is moved to the deliverable formula on MCX.

Global tie-ups

Both NSE and BSE have entered into several tie-ups with international exchanges including the London Metal Exchange, Dubai Mercantile Exchange and CME in US for commodity play. BSE’s strength could be its network of 1,400 brokers and its technology prowess backed by claims of being among the fastest trading venue. The NSE will bank on its patronage with large foreign institutional players after SEBI allowed their participation, experts say. Both have also tied up with guar gum and cotton associations for agri-commodity and bullion organisations for precious metals.

“Merger and non-merger will decide competition in the non-agri segment but the key challenge will be to develop agri play,” said Sudip Bandyopadhyay, who has been on the boards of the Hong Kong Commodity Exchange and India’ NMCE.

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