Now, trade currency futures on BSE

Bourse to soon become fourth player in currency futures where it will compete with NSE, MCX-SX and its own United Stock Exchange

BSE Ltd, Asia’s oldest stock exchange, is set to enter the most competitive segment in the stock exchange — currency futures. The exchange has received approval from the regulator.

“We have received the Securities and Exchange Board of India (Sebi) approval and plan to launch the currency futures segment in two months,” said Ashishkumar Chauhan, managing director and chief executive of BSE. The development is interesting as BSE already has a 15 per cent equity stake in the United Stock Exchange (USE), which is active in the currency segment and BSE also provides a trading platform facility at a fee to USE.

With this, BSE will be fourth player in currency futures, where it will compete with the NSE, MCX-SX and its own United Stock Exchange (USE). The development is happening at a time when one of the competitors is facing regulatory action. The currency futures market was Rs 50,000-60,000 crore market, which shrank to Rs 20,000 crore after several restrictions by the Reserve Bank of India in June following a volatile rupee. USE’s market share is around five per cent at present.

CLEAR FUTURE

• Interest rate futures would also be launched simultaneously
• BSE to also launch segment for mutual fund distributors
• Purchased trading technology from Deutsche Börse which will make trading speed much faster than rivals

BSE is also improving technology for derivatives trading. It has purchased the latest technology from leading international derivative exchange and BSE’s equity partner, Deutsche Börse. The technology is so fast that the response time will increase from 10 mili seconds at present to 200 micro seconds. This will result in increase in execution of orders from 15-20,000 per second at present to 200,000 to 500,000 per second.

“We plan to use this technology first with the currency futures and later extended to other derivatives,” said Chauhan. Interest rate futures would also be launched around the same time when currency futures will be launched, in November-end. Deutsche Börse introduced this technology only this January.

In newer businesses, BSE is having a good market share, which includes the SME segment, offer for sale and now the exchange is readying for launching a segment for mutual funds where even mutual fund distributors could take membership. This is also expected in next couple of months.

The question came up on why BSE had to launch its own currency futures when it has already a 15 per cent stake in USE, which is into the currency segment. Chauhan said: “USE is working well and they are going on their own. However, BSE members’ demand was to have all the derivatives under one umbrella and, hence, we are offering currency derivatives to the existing brokers-members at virtually no extra cost.”

The timing of BSE’s entry into the currency segment is crucial as there are reports that the government and RBI considering several reforms, which will expand and deepen this market.

Another interesting development is that post the NSEL crisis, MCX-SX has seen a fall in volumes on its currency segment.