11 August 2009

Bombay Stock Exchange - outsourcing the exchange

I don't get it. The BSE is outsourcing its exchange and clearing system to another exchange for currency and interest rate futures. And that too in favour of a new exchange which has no experience or brand. BSE has also invested 15% in this new exchange. The only USP of this exchange is that it has institutional shareholders who could bring in business. Couldn't the BSE get new institutions as shareholders if that was a great strategy? So is that the final death knell for the BSE, admitting that it cannot run any part of the exchange? And that too with the crutches of a new exchange which has nothing substantive to offer. I really don't get it.

See the Mint story about the outsourcing by BSE in favour of the United Stock Exchange.

The official website of the United Stock Exchange doesn't provide any details about itself (yet).


Kaushik said...

Really Professor? Don't you think you should give the tie-up some time before commenting on it?

Or are you a part-time astrologer besides being a finance professor?

Don't tell me that you are a financial expert, because we see such experts dime-a-dozen on TV who are excellent at providing hindsight analysis

Anonymous said...

I would like to view this stake as a strategic stake taken by BSE in the newest stock exchange in India USE powered by maverick financial services company Jaypee Capital.

To add to this, have you ever seen so many PSUs coming together on a single platform and forming an insitituion that aims to be at World's Best and not just India's Best.

You are correct that BSE could also have done the same but then the reality is that BSE has always tried but it has failed.

Lets wait and watch before commenting further. I hope like every other Indian that we get a world class exchange in out own country.

Anonymous said...

Dear Prof,

I am an IIM A grad belonging to the class of 2009.

I think there are a lot of conceptual flaws in your post.

First, it is USE that has outsourced technology and clearing and settlement to BSE and not the other way round.

Second, the institutions that have come together to create USE are not 'just any' institutional shareholders. They are the ones that run the Banking system in the country. Further, it is powered by Jaypee Capital, one of the largest trading firms in the country.

This is a completely new model in India. In the US, the NYMEX had used CME's Globex Platform initially when trading started (Please refer the Mint article you've pointed out in your post). Wasnt that eventually successful ?

Further, your allegation that USE has nothing to offer is completely misleading. In the current economic scenario, do you think that some XYZ instituion can bring together such an impressive list of Banks and trading organizations ? Don't you think that itself speaks volumes about what USE is capable of ?

BSE is a great institution and do you seriously think that this partnership is a deathknell for BSE ? How ridiculous !

I'm sure that this tie up is going to be a huge success and I'm sure you'll eat your words in a few months from now.