BSE to widen trading areas

Seeks regulators’ nod to set up power trading exchange, insurance distribution business

The BSE intends to expand the ecosystem of trading and distribution for investors. The bourse has applied to the energy and insurance regulators to set up a power trading exchange and for starting an insurance distribution business. It has got a green light from the markets regulator to launch commodity derivatives, which it will do on Monday.

INX, an exchange at the GIFT international financial centre near Gandhinagar, set up by the BSE, has had a good response, with daily trading over $1 billion (~70 billion). It has launched innovative products for commodity derivatives. Gold derivatives has been gaining ground, with $300400 million in daily trading volume.

Ashish Chauhan, managing director of BSE, says: “We have good technology and experience in transaction processing and risk management. We would like to be in all those areas where we can leverage this expertise.” BSE’s small and medium enterprise fund raising segment, mutual dund distribution, IPOs and insurance are part of distribution, while equity, currencies, bonds-interest rates and commodities are part of its trading segment and are used for risk management.

The BSE and NSE have both been allowed to enter commodity derivatives by the Securities and Exchange Board of India (Sebi). The MD said BSE has received an intention for trading intimation from 442 brokers/members.

The BSE is launching commodity derivatives beginning with gold and silver and also applied to Sebi for permits to trade in energy contracts like crude oil and natural gas. Metals derivatives will follow in the second phase and then agricultural commodities.

As of now, he is not looking for contracts

different from the existing exchanges. Contract expiry dates are also likely to match with gold-silver contracts on the Multi Commodity Exchange. The idea is to help traders plan for delivery where they have better pricing. The BSE is also making the delivery process simpler. It is not expecting a lot of business initially, one reason being the 16-day ‘pitru paksh’ period, considered inauspicious.

“The response will come gradually,” said Samir Patil, head of businesses at BSE. The bourse has also sought Sebi’s approval for transaction charges lower than that of the market leader in non-agri contracts.

INX at GIFT City is expanding its trading facility in commodities. It has set up a Special Purpose Vehicle and a wholly owned subsidiary, India INX Global Access IFSC, for access to global exchange markets through a single platform, a “single-window interface for trading on CME group exchanges”, says Chauhan.

Only those traders eligible for trading on overseas exchanges will be allowed on the GIFT Global Access to hedge or trade on CME.

For the power trading exchange, the BSE has applied to the Central Electricity Regulatory Commission. Indian Energy Exchange is the market leader, with one competitor. BSE has tied up with ICICI Bank and Power Trading Corporation, preferring to be a minority partner.

BSE has also set up a joint venture with Ebix, a US-based insurance exchange, to start an insurance distribution exchange platform.

Stockbrokers, wealth management advisors and finaicial institutions may sell life and non-life insurance products on this platform. It has applied to the sector regulator, and plans to a local partner in this venture; BSE will be a minority shareholder.