MSE seeks to merge with BSE

By Our Special Correspondent

CHENNAI, AUG. 29. For the first time ever, a regional stock exchange has sought to merge itself with the oldest and premier bourse in the country.

The Madras Stock Exchange (MSE) has reportedly veered round to the idea of shedding its independent identity in the fast- changing liberal environment and playing a sort of a `complementary role' to a larger national bourse.

The MSE, it is gleaned, has already made overtures to the mandarins of the Bombay Stock Exchange on the merger possibilities. The MSE has informally sounded out the BSE topbrass on the merger of the regional exchange when Mr. Anand Rathi was the president of the Mumbai bourse. The proposal has slipped to cold storage following the resignation of Mr. Rathi in the wake of his alleged role in the stock scam II. Both exchanges are now seeking to give it a formal touch. Mr. M. S. Narayanasamy, President of MSE, has confirmed to this correspondent that the exchange is, in fact, exploring the merger option with the BSE.

Keen market watchers see in the merger proposal the proverbial shadow that precedes the coming events. Time was when regional stock exchanges had their utility in an era where technology was conspicuous by its absence. The advent of National Stock Exchange (NSE), however, has seen technology gaining in importance and connectivity proving that simple. The BSE, too, had followed with BOLT (Bombay Online Trading Terminal). All of a sudden, the regional exchanges have found themselves increasingly pushed to the precipice.

The competition between the two premier national bourses in the wake of dipping volume has only worsened the financial miseries of the regional exchanges. Willy nilly, some of them have opted to become members of the bigger bourses. The MSE, however, had chosen to float a subsidiary to act as sub-broker for UTI Securities which has cards in both the BSE and NSE. This had saved MSE considerable money.

Had it opted to pick up either a BSE or MSE card, it would have cost it a tidy sum. In fact, the recently-floated MSE subsidiary is clocking more volume than the parent. If the proposal fructifies, it will improve liquidity for infrequently traded scrips listed only on the MSE. Further, it will encourage many a management to let their company's scrip continue to be listed even though it is trading rarely.

Since the MSE has only proposed the merger, it will wait for an in-principle agreement before proceeding to work out the modalities. In fact, according to Mr. Narayanasamy, the MSE has not filled the executive director post which has fallen vacant following completion of his term by Mr. Saji Cherian primarily because it is hoping a clearer picture to emerge on the `de- mutualisation' of the stock exchanges.

Mr. Cherian has since moved over to become the executive director of Cochin Stock Exchange. Instead of perishing in the unfolding competitive environment, it is prudent to become an appendage of a larger entity. For the larger bourse like BSE, the amalgamation of regional exchange like MSE should help it boost volume, exercise greater control over corporates and brokers, speed up redressal of investors' complaints and bring about economies of scale in operations.

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Section  : Business
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