BSE share price: Why shares of Asia’s oldest stock exchange zoomed 55% in 1 month; Details
Source: Business Standard
Shares of BSE (formerly Bombay Stock Exchange), Asia’s oldest exchange, hit a new high of Rs 4,235, as they surged 10 per cent on the National Stock Exchange (NSE) on Thursday’s intra-day trade after the Securities and Exchange Board of India (Sebi) announced new norms governing trading in futures and options (F&O) to curb excessive volumes in the segment and strengthen the overall framework governing their trade.
Most of the measures are similar to the ones announced by the markets regulator in a consultation paper released on July 30, 2024.
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On Tuesday, Sebi had rolled out six key changes in the norms governing trading in the derivatives markets, to safeguard investor’s interest. The markets regulator has tightened the trading rules for futures and options, such as rationalisation of weekly derivatives, and recalibrated the contract size, effective from November 20, 2024, apart from intraday positioning monitoring.
Apart from that, a 2 per cent extreme loss margin will additionally be applied to open short options on expiry days, while upfront premium collection will begin from February 1, 2025.
The regulator has also mandated that offsetting of positions for contracts expiring on the same day (Calender Spread) will be eliminated, while intraday position monitoring will begin from 1 April, 2025.
Post the levying of uniform charges on all customers, a further tightening of regulations governing the derivatives segment will likely impact volumes and increase the compliance cost for the industry in general and discount brokers specifically, ICICI Securities stated in a note.
The BSE has also scaled up its derivatives market share to 27 per cent/13.3 per cent in terms of notional turnover/premium turnover in September 2024. This has been on the back of product innovation, wherein they launched the expiries on different days, compared to the existing products of the NSE.
A larger market share for the BSE arises out of Sensex rather than Bankex. With the new norms allowing only one benchmark index to be made available for launch during weekly expiry, the NSE and BSE will continue with Nifty and Sensex, respectively. Earlier, since the NSE had an expiry on all days except Friday, the BSE found it difficult to scale up volumes. Nevertheless, the BSE will now have three more days to compete against the NSE.
For the BSE, since large volumes were happening on expiry day, its premium to notional turnover ratio was at 0.07 per cent, compared to 0.16 per cent for the NSE (Sept 24). With the probability of volumes increasing after the expiry days, this ratio would increase for BSE. This will not only help the company generate more revenues but also bring down the clearing and settlement costs, according to Motilal Oswal Financial Services (MOFSL).
According to the brokerage firm, the BSE should be relatively less impacted in the new regulatory environment, compared to NSE. Furthermore, the exchange has other revenue drivers, such as the co-location segment and new products (commodities and power). MOFSL currently has a ‘Neutral’ rating on the company’s stock.
Meanwhile, the BSE is trading higher for the third straight day and it has rallied 17 per cent after the exchanges hiked and introduced new transaction charges for brokers across various segments, effective from Tuesday, October 1, 2024.
As many as 6.5 million shares had changed hands on the NSE till the writing of this report.
First Published: Oct 03 2024 | 12:46 PM IST
