Making A Case For Bolt Expansion
The exchange has brought this to the notice of the Securities and Exchange Board of India and has argued that a quick clearance of its BOLT expansion plan will correct this anomaly since many of the untraded stocks would begin to get traded owing to investors getting an exit route on the nation-wide hook-up.
The BOLT expansion is back on the centrestage and dominates the Sebi agenda for the next board meeting of the markets regulator. Available indications from Sebi suggest that the finance ministry is not opposing the BOLT expansion and there are good chances of the scheme being cleared this time.
A BSE study shows that the number of listed stocks not traded on the BSE has gone up sharply from 2,562 on April 2, 1996 (41.81 per cent) to a hefty 3,495 on September 2, 1996 (52.78 per cent), and to 3,881 on September 26 (58.01 per cent).
The stocks traded to not-traded position has virtually been reversed over the period, with the number of traded stocks coming down from 3,566 on April 2 to 3,127 on September 2 to 2,809 on September 26.
BSE feels the inability of investors to find an exit route has led to the trading interest in a number of stocks being on the wane.
Interestingly, over the same period the number of listed stocks trading below par has also gone up from 41.42 per cent of the traded stocks to 49.34 per cent of the traded stocks on September 26.
BSE feels the below-par trading of the stocks is also a result of the fact that the investor interest is declining. The BOLT expansion, the exchange reasons, is one of the main measures to spur trading interest in the stocks.
The BOLT expansion stands a better chance of clearing the Sebi board hurdle now, since the exchange has made it clear that it would expand to those exchanges where one-to-one tieups are forged with BSE through memoranda of understanding (MoU).
A pathbreaking MoU was signed in mid-August by BSE and Ahmedabad Stock Exchange and the other MoUs are expected to be on similar lines.
BSE has also decided to throw open its membership to brokers from other exchanges, but the general feeling is not many brokers from other centres may want to take up an expensive BSE card when the market conditions are bad.
More brokers may choose to be associates of BSE brokers and get BOLT terminals installed in their offices, rather than become BSE members. However, BSE brokers also would have the option to expand to other centres.
Sebi appears to understand the BSE logic that having allowed NSE to expand to other centres freely, there is no real reason for holding BSE back, and not allowing it to compete on an equal footing with NSE.