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Excerpts

Can BSE challenge MCX’s monopoly in commodities trading?

(Disclosure:I am market making in the shares of Bombay Stock Exchange)
Will BSE Ltd’s plan to enter the commodity segment bear much fruit?
Taking up such challenges isn’t new to the exchange. About three years ago, when BSE started competing in the equity derivatives space, it had started from scratch. Its traded volumes in this segment are far more healthy now, although this is aided by market making incentives to trading members.
Similarly, it has managed decent volumes in the currency derivatives segment, despite a rather late launch. Again, it helped that it didn’t charge for transactions for quite a few months since its launch. While transaction charges are expected to commence from next month, they will be at a fraction of what its competitors charge. In sum, BSE has done well in garnering volumes in two market segments by lowering costs for traders. Of course, it remains to be seen if volumes will be sustainable once it starts charging fees at cost-plus rates.

But pursuing a similar strategy in the commodities space may entail some additional challenges. To start with, the Forward Markets Commission (FMC) currently doesn’t permit market making. Even if it does allow it in the future, BSE might find the regulator’s ownership guidelines to be a constraint. New shareholding guidelines for commodity exchanges limit the maximum ownership of one entity at 15%. Even if BSE manages to gather other investors to buy an 85% stake in the new venture, it will need a buy-in from this set of investors to invest a reasonably high sum for market making purposes. Like the equity segment, commodities trading now includes a transaction tax, which means that market making schemes should at least offset a large part of this cost for trading members to consider the new platform.

On the positive side, lately, BSE’s faster trading technology, sourced from Deutsche Borse, has generated interest from the trading community. And compared to MCX’s other competitors in the commodities space, BSE is far more aggressive and has better relationships with the trading community. While these factors should help, many others need to fall in place for traders to be open to shifting loyalties.
-from Mint
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Links

Linkfest:November 18,2014

Some stuff I am reading today morning:

All eyes on India (Ivanhoff)

Abe’s 1 Trillion $ Stock Market gift (Bloomberg)

Funds woo risk averse HNIs with absolute returns (ET)

Interview with CLSA’s Christoper Wood (Mint)

Narendra Modi takes a dig at RBI (FE)

Pandering your wealth away (Fool)

The bloody origins of money (Quartz)

Have systems not goals (Scott Adams)

The code that made human progress possible (Bill Bonner)

Watch out SBI,HDFC Bank (FirstBiz)

Categories
Excerpts

BSE Derivative turnover spikes to Rs 116 lakh cr for Apr-Oct

(Disclosure: I am market making in the shares of Bombay Stock Exchange)

Equity derivative turnover at BSE has grown substantially to over Rs 116 lakh crore so far in the current fiscal, from year-ago levels, as the exchange has put in place new measures including technology systems for faster trades.

The exchange had recorded trades amounting to about Rs 50 lakh crore, during the April-October period in fiscal 2013-14.

In the last six months itself, the orders per day at BSE has grown nearly three times from 15 crore per day to 45 crore per day, helped by a faster technology.

In terms of volumes, the trades on the exchange also surged to nearly 30 crore in the first seven months of current fiscal as against 16.80 crore in the year-ago period.

BSE, a top exchange globally for the number of listed companies, had upgraded its technology platform to Bolt Plus for all its segments earlier this year.

Following this, the equity derivative segment value on the bourse has stood at Rs 19-24 lakh crore on a monthly basis, as against Rs 5 lakh crore in April.

Number of derivative contracts also surged from 1.5 crore in April to more than 5 crore in the subsequent months.

“BSE implemented new technology in April 2014 which provides response time of 200 micro-seconds with a capacity of 500,000 orders per second.

“It is faster than any exchange by ten times or more in India giving significant advantage to the investors who trade on BSE vis-a-vis other exchanges,” BSE CEO Ashish Chauhan told PTI.

Noting that it had been only six months since the new system was implemented, Chauhan said: “Even within this short period of six months, number of orders per day on BSE has gone up from 15 crore per day to 45 crore per day”.

According to Chauhan, many Indian members and even foreign brokerages who were not trading on BSE earlier have started connecting to the new system.

“We believe even now many exchange technology vendors have not changed their technology to interact with high speed and scale system like the one BSE has implemented at 200 micro seconds.

“We believe it will take some more time for old technology vendors to change to the new faster technology… Only 20 per cent vendors seem to have changed their systems yet. Once the balance 80 per cent technology vendors change their system to become faster to match BSE system, it will perhaps see more than 200 or 300 crore orders per day on routine basis,” he added.-from BS

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CoatTailing

Portfolio of Malabar India Fund

This post is in continuation of my coat tailing series (see here)

To know what other top investors are  buying/holding/selling in India, subscribe to our Investor Wisdom Newsletter

Malabar India Fund is a well known fund investing in the small/midcap space in India.

Their significant holdings in India as on 30 Sept,2014 as per Stock Exchanges is given below:

Symbol Entity # of Shares % Date End
ADOR FONTECH LTD Malabar India Fund Ltd. 403035 2.3 201409
AVANTI Malabar India Fund Ltd. 123000 1.35 201409
GANDHITUBE MALABAR INDIA FUND LIMITED 306881 2.09 201409
KKCL Malabar India Fund Limited 213361 1.73 201409
LAOPALA MALABAR INDIA FUND LTD 1305022 2.35 201409
MAYURUNIQ MALABAR INDIA FUND LIMITED 852706 1.97 201409
ORIENTREF Malabar India Fund Limited 1908672 1.59 201409
SUPRAJIT Malabar India Fund Limited 1800817 1.5 201409
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Interview Video

Interview with Joel Greenblatt