In the past few days, investors have been witnessing what allegedly transpired at the country's largest bourse, the National Stock Exchange some years ago. A front-line institution that was supposed to set an example in corporate governance by following the highest standards, did not take the right steps when it probably mattered the most. Even as investigations continue, it is clear that some 'Himalayan' mistakes may have been committed by the top leadership and the board of directors.

Today, the NSE commands a market share of 93 per cent in cash segment, equity futures (100 per cent), equity options (94 per cent) and currency derivative (73 per cent). Apart from NSE, investors and traders have only one other solid option - BSE. But when NSE entered the exchange scene a few years back, the situation was starkly different.

The Indian securities market was vibrant with almost two dozen operational stock exchanges that included the Delhi Stock Exchange, Calcutta Stock Exchange, Madras Stock Exchange, OTCEI and the Ahmedabad Stock Exchange. Most of them were powerful regional players with widely-known listed companies. Put together, over 9,500 companies were listed on them all over the country till 2002.

With technological edge, the NSE expanded across-the-region and made the regional bourses less relevant. Further SEBI's 2012 regulation for stock exchanges to have a minimum net worth of ₹100 crore and an annual trading of ₹1,000 crore was the proverbial last nail. Consequently, most of them were forced to exit the business.

SEBI wanted to end dominance

It is a virtual duopoly today in the stock exchange sector. Markets regulator SEBI, in fact, was keen to end the dominance of these exchanges. It has relaxed ownership norms (allowing individuals to hold up to 15 per cent), besides floating other proposals. However, no one seems to be keen to set up new exchanges. Even defunct regional stock exchanges are not keen to revive, as some of them feel attracting lost volume would be difficult.

In this backdrop, the SEBI could consider relaxing the norms further to allow top brokerages such as Zerodha, ICICI Securities, Angel Broking, Upstox, Motilal Oswal or Kotak Securities and others to enter the fray. Of course, this would set the clock back to 125 years, as the BSE (then Bombay Stock Exchange) was started by brokers only.

Some conflict areas obviously need to be addressed. A broker floating an exchange can lead to it gaining undue advantage over rivals. Also, any new exchange coming in does not mean it will be impervious to wrongdoings. Water tight regulations between broking and exchange verticals can be conceived for better corporate governance of such entrants.

SEBI can start a dialogue with them for the larger interest of the securities market. The question is will brokerages rise to the occasion?

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