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BSE seeks Sebi nod for international stock exchange at GIFT City

Livemint:  September 15, 2016

Mumbai: Asia’s oldest stock exchange BSE Ltd is planning to open an international stock exchange at GIFT City, India’s maiden international financial services centre in Gandhinagar, Gujarat.

BSE, which has filed for an initial public offering (IPO), said in its prospectus that it has requested in-principle approval from the Securities and Exchange Board of India (Sebi) to open the exchange.

BSE plans to start operations in GIFT City by January during the Vibrant Gujarat summit, two BSE officials with direct knowledge of the matter said, on condition of anonymity. This is, of course, subject to the capital markets regulator approving the new bourse.

The new exchange will provide a platform for Indian companies to raise capital by issuing foreign currency instruments, allow start-ups to raise equity from foreign investors by getting listed on the international exchange and also allow companies incorporated outside India to list in the international financial services centre, the draft prospectus said.

It will enable members to “trade from the international financial services centre in global capital markets such as NYSE, LSE, NASDAQ, etc., which many brokers are currently doing from other financial centres such as Singapore and Hong Kong,” according to a presentation BSE made to investors and brokers soliciting membership in the proposed exchange.

An international exchange would open up a new stream of revenue for BSE which has been losing market share to rival National Stock Exchange of India Ltd (NSE) for quite some time. In the last five years, BSE’s market share in the equity cash-trading segment has halved to 15%. Its share in the derivatives segment is close to negligible.

BSE’s consolidated net profit dropped 37% to Rs96.74 crore in fiscal 2016. In the June quarter, the exchange’s net profit increased 40% to Rs52 crore.

The new exchange “will increase our brand’s profile and also provide us with additional sources of revenue”, the prospectus said.

A BSE spokesperson declined to comment.

A Sebi spokesperson didn’t respond to an email sent on Monday.

According to the draft prospectus, BSE plans to spend Rs50 crore to capitalize a clearing corporation and another Rs25 crore for the stock exchange. It expects to fund these through its internal accruals. At the end of March, the bourse had cash and bank balances amounting to Rs1,610 crore.

The exchange’s IPO is a pure offer-for-sale (OFS), giving an exit opportunity for existing investors.

BSE will seek partnerships with other exchange operators to start the international exchange at GIFT City, the draft prospectus said. It intends to set up an international exchange and clearing corporation, both wholly owned subsidiaries.

The exchange signed an agreement with GIFT SEZ Ltd to set up these two entities in January 2015.

On 11 August, BSE secured approval from the ministry of corporate affairs (MCA) to set up the international exchange.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.