OMX tech to reach BSE only by 2009

The Bombay Stock Exchange (BSE) will see the implementation of the new system developed on technology provided by the Nasdaq-owned OMX group only by the second half of 2009. The Swedish firm is still in the process of meeting the final requirements, an official said.

“The deal will be completed 10-12 months after the final requirements are met. We are now in the process of concluding these,” a senior official of Nasdaq OMX group told Business Standard.

The deal between Nasdaq OMX and BSE was signed in January 2008.

“The first phase of the system will roll out by mid-2008. The launch of BSE’s new trading platform is part of its strategy to enhance the volume, speed up transactions and bring more liquidity,” Rajnikant Patel, former managing director & CEO of the stock exchange had said at the time of the signing.

The technology provided by OMX would make the BSE trading system more flexible and would equip it to introduce new products. It will also provide the exchange with the market-maker function, which would help it generate greater volumes in the futures and options segment. The exchange had a market-maker scheme planned in the last financial year, but it never materialised. A market-maker is an entity that quotes both buying and selling prices in a financial instrument.

The OMX technology-based system will give the BSE a single front-end terminal through which different kinds of trading can be done. At any time, if the BSE wishes to start a separate entity for commodities trading, this will help. Once the new systems are in place, BSE can create a new market overnight.

The OMX is still talking to the BSE about the kind of functions the stock exchange wants to be built into the system. The firm is also conducting a comprehensive study of the BSE’s current BOLT system (BSE on-line trading), provided by CMC. The capacity of the BOLT platform stands at 800,000 orders a day.

The OMX system will also help institution conduct automatic or algorithmic trading on the BSE. This is direct market access (DMA), which was allowed by the capital markets regulator, the Securities and Exchange Board of India (Sebi) early this year. Some institutions have already executed DMA trades on the National Stock Exchange (NSE).

BSE has already paid about $5 million to OMX, of the total contract worth $37.5 million.