But it has a long way to go, and faces competition from a third player
For a stock exchange that began new life in 2007, it’s not doing too badly: A 16 percent market share, up five times in six years; a 65 percent share in retail debt and 20 percent in institutional trading; and a score of 71 out of 81 offers for share sale put through the exchange.
But for an institution that’s as old as the hills—137 years to be precise—these achievements are underwhelming. Ashishkumar Chauhan, CEO of the Bombay Stock Exchange (BSE), believes that the scorecard should be read from 2007, not 1875. He admonishes Forbes India: “You look at the BSE as a stock exchange that is 137 years old. I look at it as a new company that got demutualised only in 2007. We have a new management that is driving this business professionally. And the results are showing.”
Sure, they are.
When Chauhan, 45, joined the exchange five years ago in 2009, BSE was in slide, about to lose the game to rival National Stock Exchange (NSE) in almost all segments of the market. In 2010, BSE had a market share of around 3 percent in both the equities and derivatives space. But since then Chauhan has been a blur of activity. Market share in equity and derivatives is up to 16 percent; the trading technology is being given an adrenaline shot through a tie-up with Deutsche Borse, which will enable the exchange to process 500,000 orders every second (NSE can currently manage 160,000); and then there’s a tie-up with Standard and Poors Dow Jones (SPDJ) Indices to elevate the Sensex brand. The 30-share BSE Sensex is now the S&P Sensex, giving it an international image boost.
Despite its 137 years, Chauhan’s BSE is beginning to develop the get-up-and-go spirit. “The BSE has a lot of rigour and energy to create new products,” says Koel Ghosh, who looks after business development at the new BSE-SPDJ index company based in Mumbai. The tie-up with S&P is particularly sweet for BSE, because the former’s first alliance was with NSE. The break-up of that marriage allowed Chauhan to poach talent from NSE.
That includes Ghosh, a SPDJ employee, but Chauhan himself is a product of NSE’s innovative years. He was part of the five-person startup team at NSE in 1993, the other four being Ravi Narain, Chitra Ramakrishna (the new managing director), Raghavan Putran and K Kumar. This team largely created the NSE under the tutelage of the late RH Patil of the IDBI.
Chauhan’s key achievement at NSE was the launch of the derivatives segment in 2001—it turned out to be a roaring success. He now wants to do an encore at BSE, and has managed to make significant headway. From zero, BSE’s market share in derivatives is 20 percent today. In index options, Chauhan has a 25 percent slice of the action. Taking equity and derivatives together, the market share is 18 percent.
“Ashish Chauhan is the best thing that has happened to the BSE after MR Mayya (former executive director). He is in tune with the big picture and has his ears to the ground. He really understands what market participants want in their product offerings. He has already gained market share in derivatives and other products,” says Deena Mehta, CEO of Asit C Mehta Investment Intermediaries. She was the first woman president of BSE back in 2001.
Chauhan’s strategy can be summed up in two words: Widen and deepen. In the stock market, the key to success is trading depth, or volumes. Volumes depend on liquidity—which, in turn, means making transactions cheaper. Chauhan chased volumes by dropping prices.
It’s early days yet, and Chauhan feels he needs time to spruce up on profitability. He points to his zero to 20 percent share in derivatives growth as proof that his business growth strategy is working.
But that’s the depth part; he is also trying to widen BSE’s reach by going for the small fish. As a market veteran, Chauhan knows in his heart of hearts that he cannot beat NSE at its own game. So he is trying for new game in the small and medium enterprises (SME) sector and mutual funds. He wants to encourage more SMEs to list on BSE, and mutual funds to sell units through the market. Another window he has opened is the offer for sale—a device used by promoters to sell smaller lots of shares without an IPO to comply with market regulator Sebi’s minimum public shareholding norms.
Kannan himself left in 2010, leaving Chauhan in charge. Having recently demutualised in 2007, the exchange had low business volumes but two great assets: The Sensex index and a distribution network. What it lacked was products for the market. The technology too was outdated.
(This story appears in the 26 July, 2013 issue of Forbes India. To visit our Archives, click here.)