BSE proposes upto 49% stake in Stock Exchanges by Foreign Exchanges

(Disclosure:I am market making in the shares of BSE)

The government should allow leading global bourses to hold up to 49% stake in Indian stock exchanges to enhance the competitiveness of domestic capital markets, BSE has said.

The current policy permits foreign bourses to own a maximum of 5% stake in Indian exchanges. “The current policy on ownership of stock exchanges may be amended to allow for an investment stake of at least 15% (or preferably even 26-49%) for foreign exchanges of international repute, in line with the regulations for Indian exchanges,” BSE said.

The recommendation has been made by BSE in a document to the ministry of finance ahead of the budget in July. According to the leading stock exchange, while the current policy does not “preclude a strategic partnership between an Indian and a foreign exchange, the 5% cap does make such a partnership difficult”.

It added: “Without the potential for a meaningful investment stake of at least 15% (or preferably even 26-49%) potential foreign partners are reluctant to engage fully because there is inadequate ‘skin in the game.’” BSE has said the move will allow domestic stock exchanges the flexibility to form deeper partnerships with global bourses, enhance global competitiveness, help attract more foreign funds, facilitate and accelerate adoption of best-in- class technology. “The foreign exchanges can only afford to invest their time and resources if their contribution is rewarded commensurately,” BSE said, adding that a larger ownership stake is one way to ensure their engagement.-from Mint

Currently, both Deutsche Bourse AG and Singapore Exchange Ltd. own around 4.92% each in BSE