Ever since foreign investors showed the willingness to shell out hefty valuations for a stake in the two national bourses, there is renewed investor interest in running, creating, acquiring and modernising stock exchanges. The latest is an ambitious plan to revive the practically defunct Delhi Stock Exchange (DSE) by first putting in place a sophisticated, automated system called Delhi Online Trading System 2007 (Dots-07), replacing the entire existing hardware and software. This will include broker-office automation, clearing and settlement systems and interface with depositories with scope for rapid expansion. Some of the biggest technology teams are in the fray to bag the automation order. They include Financial Technologies (FT) owned by Jignesh Shah, who set up the Multi-Commodity Exchange (MCX), CMC Ltd, ENC Software Solutions (now called Marketplace Technologies) and one Mikroz Solutions. Interestingly, NSEIT, which probably has the best pedigree to make such a bid, showed initial interest but is no longer in the running. But then NSEIT has yielded ground to FT in developing broker back office software, too, and is now a distant second. The NSE, which is otherwise aggressively competitive, is relatively soft with FT; it even stunned the market by acquiring a 5 per cent stake in FT-promoted MCX although NSE was one of the original promoters of MCX’s rival, the NCDEX.

Takeover moves

A couple of years ago, when the government mandated demutualisation of bourses, it triggered a rush by the broker consortia to take control of DSE, which had then seemed ripe for the picking. The Securities and Exchange Board of India (Sebi) has limited individual shareholding to 5 per cent, overriding the Ananthraman Committee’s recommendation to permit 26 per cent ownership to strategic partners. The Sebi rules initially put off investors, but since the emphasis is on shareholding rather than management control, some large entities are again working at a possible takeover of the Delhi Stock Exchange through an informal consortium that will own 5 per cent of the equity each, but will yield decision-making and leadership to a single entity. Sometime ago, a bunch of big BSE brokers were attempting a similar formula to control India’s oldest bourse, but they seem to have give up their plan. Meanwhile, several exchanges, especially NSE and MCX, are quietly jostling for permission to set up an exchange for small & medium (SME) companies. The BSE was first permitted to set up an SME platform called Indonext, which has languished and the field is wide open again. The booming SME sector has increased the need for such a bourse. Unfortunately the regulator is unable to come up with a model that will ensure liquidity and not end up as another failed experiment like the OTC Exchange of India or even Indonext.

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