The Indian stock market landscape, long dominated by the BSE and NSE, may soon witness a significant shift. The Metropolitan Stock Exchange of India (MSE) is poised to begin trading soon, potentially ending the existing duopoly. This development could introduce increased competition, benefiting investors and market participants alike.
MSE was established on August 14, 2008, became operational on September 16, 2008, and was officially recognized as a "Stock Exchange" under the Companies Act on December 21, 2012. MSE offers an electronic platform for trading across multiple segments, including Capital Market, Futures & Options, Currency Derivatives, and Debt Market. The exchange introduced Currency Derivatives trading on October 7, 2008, and launched the Capital Market, Futures & Options segments, along with the SX40 index, on February 9, 2013. The SX40, a 40-stock index, began trading on May 15, 2013. The Debt Market segment was introduced on June 7, 2013, followed by the launch of Interest Rate Futures on January 20, 2014. However, MSE temporarily suspended trading in its debt segment from September 2020.
To enhance market liquidity and attract participants, MSE is implementing a Liquidity Enhancement Scheme for 130 stocks. This scheme involves dedicated market makers and specific two-way quotes, which should encourage more active trading and tighter bid-ask spreads.
The re-emergence of MSE as a viable trading platform could have several positive implications. Increased competition among exchanges may lead to lower transaction costs, improved services, and greater innovation. Investors could benefit from a wider array of choices and potentially better execution prices. For companies, a third exchange provides an additional avenue for listing their securities and raising capital.
According to a SEBI report, India is a major player in global exchange-traded derivatives, accounting for 30-50% of the market, with index options leading the growth. The turnover in index options grew significantly between FY18 and FY24, with increased participation from individual investors. The anticipated launch of MSE could further contribute to the growth and diversification of the Indian financial markets.
MSE's commitment to financial literacy and inclusion is also noteworthy. The exchange conducts investor education and awareness programs across the country, promoting greater participation in the stock market. This aligns with the government's vision of financial inclusion and empowering more people to invest and build wealth.
As MSE prepares to begin trading, the Indian stock market is on the cusp of an exciting new chapter. The potential end of the BSE-NSE duopoly could usher in a more competitive and dynamic environment, ultimately benefiting investors and contributing to the continued growth of the Indian economy.
