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The country's newest bourse, United Stock Exchange, currently offering currency futures trading only, is planning to enter new segments such as equities and interest rate futures to expand its business and profits.
The move could put USE in direct competition with BSE, but its chief said that the bourse would make sure not to rub shoulders with its larger rival BSE, which also happens to be its largest shareholder.
“Yes, it is true that we have to enter more segments of trading, which is in fact a natural business progression,” USE Managing Director and CEO, Mr T.S. Narayanasami, told PTI.
He, however, added that USE was yet to approach its board with any such plans.
Currently, BSE and NSE are the only two major national stock exchanges providing equity trading, while two others, USE and MCX-SX are only present in currency futures market. BSE withdrew itself from currency futures in favour of USE, while NSE is present in virtually all the segments.
Competition, hot topic
The issue of competition in stock exchange arena has become a hot topic of debate and the Competition Commission of India recently slapped a Rs 50 crore penalty on NSE after finding it guilty of abusing its dominant market position.
In its order, which followed a probe conducted by it pursuant to a complaint filed by MCX-SX, the competition watchdog also asked the NSE to immediately stop subsidising its products in currency derivatives market and start imposing a transaction fee.
Welcoming the CCI move, Mr Narayanasami said there has to be a revenue model for any business and it was good that some transaction fees are charged, especially for those entities which have only single-source revenues.
Noting that USE needs to diversify, he said: “We will ensure that there is no conflict of interest with the BSE, as and when we decide to enter new segments.
Delicate issue
“After all the BSE is our largest shareholder with 15 per cent stake and we have no plans to antagonise them,” he added.
He also noted that it was “a very delicate issue, since BSE had shut their currency business when they picked up stake in us. We have to respect that decision“.
Mr Narayansami's comments come in the midst of rumours that BSE might sell its 15 per cent stake in USE, following which the two would compete in all the market segments.
Mr Narayanasami also scotched rumours about any plans to leave USE and said that there was “no basis for such reports. They are all sheer rumours. I am very much with the exchange and have great plans for it as of now.”
Asked whether as the CEO he supports USE entering the equity space, Mr Narayanasami said, “yes as a natural course of our business, but everything depends on the board decision.”
On whether BSE could sell its stake, he said: “never, not at all.”
No plans to exit
When contacted, a senior BSE official also said that the premier exchange had no plans to exit USE.
“They (USE) have given us tremendous return on our investment. Why should we quit a venture that is giving us high returns and also has higher potential to deliver more?” asked the BSE official, who did not want to be identified.
On the business strategy for USE as it completes the first year of operations in mid-September, Mr Narayanasami said, “over the past 10 months we have consolidated our position in the market with our volume share touching 26 per cent. My target 30 per cent market share by September.”
As on June-end, USE had 21.65 per cent of the volume, while NSE had 42.75 per cent and MCX 35.06 per cent, according to the data available on their Web sites.
This is a major jump for USE from March, when it had just 10.40 per cent of the market, while MCX—SX was on the top with 46.26 per cent.
USE had recorded largest number of contracts on the first day of trading with a 52 per cent market share. It operates on four currency pairs against the rupee — the US dollar, the euro, the pound and the yen.
On the new business areas that the company is looking to enter, USE's President for Marketing and Business Development, Mr Saurabh Arora, said they will approach the market regulator SEBI to seek permission for entering interest rate futures segment.
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