BSE cries foul over NSE corporate bond advantage

Ashish Rukhaiyar / Mumbai February 09, 2010
The reporting platform is hosted by NSE, so it gets the business.

The rivalry between India’s two leading stock exchanges, the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE), does not seem to be dying. This time, the two are glaring at each other over clearing and settlement of corporate bonds.

At the heart of the matter is the Fixed Income Money Market and Derivatives Association of India’s (Fimmda’s) platform hosted by NSE. This gives NSE far better access than BSE.

The problem started in October last year, when the Securities and Exchange Board of India (Sebi) issued a circular that clearing and settlement of trades in corporate bonds should be done through clearing corporations from December.

Market participants were given an option between NSE’s National Securities Clearing Corporation (NSCCL) and BSE’s Indian Clearing Corporation (ICCL). Prior to this, the two exchanges and Fimmda were authorised to set up and maintain only reporting platforms to capture information related to trading in corporate bonds.

According to an informed source, BSE is fighting hard to get the same access to the Fimmda platform. “RBI (Reserve Bank of India) requires that all corporate deals be reported to Fimmda. One can easily settle bond trades on the NSE platform because of built-in parameters. If someone wants to settle the same trade through BSE, he has to go to the exchange’s website and key in the details. This acts as a big deterrent,” said the source.

NSE, said a source, was recently asked by a senior finance ministry official to modify the system so that both exchanges could equally access the Fimmda platform.

The issue was also raised at a seminar organised by the National Institute of Public Finance and Policy in January, said a source who was present at the event. The seminar was attended by senior officials from the government, RBI, Sebi, stock exchanges and banks, besides money market representatives.

An email to NSE was not answered will the time of going to press. But, the numbers speak for themselves. According to Sebi, corporate bonds worth Rs 31,397 crore were settled on NSE’s platform in January. The BSE platform saw trades worth a paltry Rs 1,244 crore. In December, the NSE platform accounted for bond trading worth Rs 17,300 crore, compared to BSE’s Rs 404 crore.

NSE itself had, in a circular issued on November 23, noted that “where trades are reported on the FIMMDA reporting platform, the participants can directly express their intent to settle on the (NSCCL) platform in the clear & settle screen”. This is not possible if one wants to settle through BSE’s ICC.

A Sebi circular issued in April 2007 had said: “BSE and NSE shall ensure that the norms on trading hours and access rights to trading systems shall broadly follow the norms presently followed in the equity segment. BSE and NSE shall ensure that the norms are harmonious between the exchanges.”