BSE to ramp up futures trade

Bourse plans to allow derivatives trading on BOLT terminals.

The Bombay Stock Exchange (BSE) is finally taking steps to re-energise its almost-dormant derivatives segment by allowing trading of futures in Sensex and stocks on BSE Online Trading (BOLT) terminals.

BOLT terminals are now used for trading in the cash segment of the exchange. The move is aimed at simplifying the process for doing derivative trades as cash and futures trades. The idea is to make futures trading easier and cheaper.

The move by Asia's oldest stock exchange was long overdue as it has lost out to the National Stock Exchange (NSE) in the derivatives segment, with its market share at less than 1 per cent. NSE enjoys a virtual monopoly status in this segment.
 

TIME TO COMPEE

* The move was long overdue as the BSE has lost out to the NSE in the derivatives segment, with its market share at less than 1 per cent

* There are 40,000 BOLT terminals in 400 cities with 700 BSE members

* At present, derivatives trading at BSE takes place through a fully automated screen-based trading platform called DTSS

There are 40,000 BOLT terminals in 400 cities with 700 BSE members. BSE had started BOLT terminals after the entry of NSE.

At present, the derivatives trading at BSE takes place through a fully automated screen-based trading platform called DTSS (Derivatives Trading and Settlement System) which is designed to allow trading on a real time basis. In addition to generating trades by matching opposite orders, DTSS also generates various reports for the members.

There are 280 BSE members registered for derivatives, but the problem is that many of them don’t have DTSS at all the branches. This is one of the factors why derivative trading has remained dormant so far on BSE, allowing NSE to steal a march over it in the derivatives market.

Sources close to BSE said that offering derivative trading on BOLT in early May is just the first step and some more measures to reactivate the segment would follow. Initially, only futures in index and stocks will be allowed as the exchange has to introduce some changes on the technology front.

Options can be allowed in the second phase. BSE is also planning to introduce other features that are available in DTSS on BOLT terminals later. Those brokers who want to trade in derivatives on BOLT would not have to bear any extra charges, but they will have to comply with requirements related to taking derivative membership, separate registration of clients for derivatives and other regulatory requirements.

Facility to trade in futures on BOLT will help brokers to trade with one terminal and single login. BSE sources said the facility was expected to increase volumes in derivatives and with the cross margining facilities available now, brokers would find it easy. This will also give some arbitrage opportunities to traders on BSE's cash and futures segment.