Explained: Why BSE shares are falling today
Shares of BSE Ltd, the Indian stock exchange operator, experienced volatility on Wednesday, following a significant 5% pre-market drop. At around 12:16 pm, the shares were down 1.3%, trading at Rs 2,629.30. The drop comes as the company announced a shift in the expiry day of its equity derivative contracts from Tuesdays to Thursdays, effective from September 1, after regulatory approval.advertisementThe change in expiry day has raised concerns about BSE's market share in the equity derivatives segment. The National Stock Exchange (NSE), a larger and unlisted rival, will continue to have its derivative contracts expire on Tuesdays. This scheduling difference could influence trading patterns and market share distribution between the two exchanges.BSE's decision was partly influenced by a regulatory move by the Securities and Exchange Board of India (Sebi), which aims to curb the derivatives trading frenzy by limiting weekly options contracts to one benchmark index per exchange and standardising expiry days to either Tuesday or Thursday.
The regulatory intervention is expected to impact BSE's market dynamics significantly, potentially leading to a shift in trading volumes.SHOULD YOU BUY?Ambit Capital, a brokerage firm, has lowered its target price for BSE shares by 7% to Rs 2,050, citing up to a 10% risk to earnings due to potential declines in market share. "While BSE could offset earnings risks by increasing exchange fees for options, it is unlikely to compensate for the lost growth," the brokerage noted.advertisementTo address potential disruptions, a source familiar with BSE's strategy stated, "Existing contracts will continue till September (and) this gives us time to shore up liquidity/ volumes and 100 colocation racks used by high volume traders will be populated by then." These colocation racks allow faster trading through on-site servers, which could help in managing the expected market shifts.Goldman Sachs projects that BSE will gain 0.5 percentage points in its index options market share monthly, a drop from the previous gain of 0.7–0.8 percentage points. The brokerage anticipates BSE's market share to decline to approximately 21% from the current 24% by September 2025, highlighting the challenges ahead.According to UBS, "As per our calculation, 10% drop in volumes for BSE can impact profitability by 5%–6%, impact market share by 210 basis points." This potential dip in volumes could substantially affect BSE's financial performance and market standing, highlighting the need for strategic adjustments.Must Watch
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