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[ASSIGNMENT ]
This Assignment is to deal with two question 1) why derivatives trading volume is Higher in NSE compared to BSE. 2) impact of growth of the financial derivatives on the Indian financial system.
Financial Derivatives
[ASSIGNMENT ]
Financial Derivatives
[ASSIGNMENT ]
As has taken place with competing derivatives markets elsewhere in the world, there was substantial competition in the early days of the market. However, once NSE obtained some critical mass, BSE turnover substantially faded away. Today NSE has become the clearly dominant market trading equity derivatives in India.
Financial Derivatives
[ASSIGNMENT ]
this phase SEBI wrongly imposed an ownership cap of 5% on any person to own shares of a stock exchange. This continues till today and is a huge problem . This phase was full of hope of reform. Brokers who received shares of the exchange in lieu of the fractured ownership and trading rights briefly traded shares of the BSE at huge premiums. International investors like Deutsche Boerse and others, despondent about the 5% cap, saw a ray of light. New investors like George Soros saw merit in investing in the exchange. Despite the best efforts of the A star team, BSE continued to struggle. It invested quixotically (15%) in a currency exchange, the United Stock Exchange thereby outsourcing its exchange function in currency derivatives for a 15% share in the returns. The problems in this phase were a) the 5% limit on ownership, which meant that anyone who wanted to invest in BSE and give it a competitive advantage was unable to take control of BSE and give it a makeover b) because the shareholders had been so emasculated, the management felt directionless with a Board which drew no power from the shareholders. c) There was no competitive advantage the BSE had. There was nothing, nothing at all which BSE could do, which NSE couldn't replicate in 24 hours with more technology, more money and with a history of far deeper markets in an industry where liquidity breeds more liquidity. d) there existed a policy vacuum with respect to whether SEBI stood for listing of exchanges or not, further muddied by the Jalan Committee report which made recommendations without even reading the annexures attached by them to the Committee report. This cloud has thankfully lifted a few days back.
Reference: http://spparekh.blogspot.in/2012/04/future-of-bse.html
http://iief.com/Research/CHAP1.PDF