Latest news with #MSEI
Mint
03-06-2025
- Business
- Mint
MSEI investors uncertain about their bet after Sebi expiry day rule
Broking firms and their founders who backed Metropolitan Stock Exchange of India (MSEI) are uncertain about the fate of their investments after the market regulator limited the weekly expiry of index options to two days, according to executives at two of the four companies. However, these investors have no immediate plan to divest their stakes in MSEI, the executives said on the condition of anonymity. Groww's parent Billionbrains Garage Ventures Pvt; Rainmatter Investments, backed by the Kamath brothers of Zerodha; Share India Securities Ltd; and Securocorp Securities India Pvt Ltd had purchased a combined 19.84% stake in the exchange for ₹238 crore on 24 December last year. The investments were made before Sebi's consultation paper of 27 March seeking public comments on its proposal to limit the weekly option expiry days. On 26 May, Sebi's circular–titled Final Settlement Day (Expiry Day) for Equity Derivatives Contracts–curtailed the expiries for hugely popular index options to Tuesday and Thursday every week. Read more: A loophole lets retail investors bid for some small-business IPOs The investors purchased the stake assuming that Sebi would let each exchange launch index options on one day of their choice every week, per a 1 October circular last year mandating a single expiry per exchange per week, among other things, the executives quoted earlier said. However, Sebi's circular last month mandating two days of expiry for multiple exchanges means that MSEI will be locked in a fight for market share with either BSE Ltd or the National Stock Exchange when Sebi approves a weekly expiry for the bourse. NSE had a three-month rolling market share of 80% in equity options (index plus stock options' premium turnover) as on 30 April, with BSE accounting for the rest, according to NSE data. 'The latest regulation on final expiry day will impact the MSEI plan to gain traction through the weekly expiry option, given the competition the bourse will face from the established exchanges as and when it gets regulatory approval for such a contract," said the first executive quoted earlier. 'This, in turn, will make the fate of our investment uncertain. But, we will not sell our stake because of this new rule as we typically invest for the long term. We will wait and see." 'We are staring at uncertainty over our investment in the exchange," said the second executive. 'When we invested, the idea was that we could have our tailored contracts traded on days there are no expiry from BSE or NSE to differentiate ourselves. But, if our contracts are forced to have expiry on the same day as any of the big exchanges, our derivative products will be a non-starter. It's kind of unfair for Sebi to leave us with little option." Queries emailed to the four investors and MSEI on their plans ahead went unanswered. A Sebi official, too, was unavailable for comment until press time. Renewal of recognition The problems of revival for MSEI come ahead of the exchange's renewal of its recognition by Sebi on 15 September this year. The exchange gets a renewal every year. Of the six Sebi-recognised exchanges, MSEI is the only one that hasn't received permanent recognition from the regulator. The ones permanently recognized by Sebi are NSE, BSE, NCDEX, MCX and the Calcutta Stock Exchange. Queries emailed to Sebi and MSEI on the reason for its annual renewal went unanswered. MSEI has Sebi permission to offer equity, equity derivatives, currency derivatives (including interest rate futures) and debt. Every exchange requires what's known as a segment approval from Sebi to offer products to investors and traders. Other shareholders of MSEI include 10 trading member banks, which held a combined 10.49% as of 31 March 2025. These include Union Bank of India, State Bank of India, Bank of Baroda, HDFC Bank and Axis Bank. Other well-known shareholders include commodity derivatives bourse MCX (5.53%) and co-founder of Enam Holdings Nemish Shah (1.62%). Read more: Only one in five derivative participants trades solely in F&O The bourse offers trading in currency futures, where it had a turnover of ₹2,260 crore against NSE's ₹74328 crore last month, according to Sebi data. There was no trading in equity, equity derivatives and interest derivatives. Shares of MSEI in the unlisted market soared from around ₹2 apiece prior to the stake purchase by the four investors in December to as much as ₹14 in the following weeks before cooling to around ₹8-8.50 currently, according to Narinder Wadhwa, co-founder of SKI Capital Services Ltd.
Mint
06-05-2025
- Business
- Mint
Sebi's plan set to derail Metropolitan Stock Exchange's comeback
A Mumbai-based stock exchange was planning a revival, but the market regulator's proposal to limit index derivative expiries to two days a week has cast its future into doubt. The Metropolitan Stock Exchange of India (MSEI) had raised ₹ 238 crore from broking firm Groww's parent Billionbrains Garage Ventures, Zerodha's Rainmatter Investments, Share India Securities, and Securocorp Securities India in December 2024. The bourse planned to offer a derivative contract for its flagship SX40 index. All National Stock Exchange Ltd's derivatives expire on Thursday, BSE Ltd's on Tuesday, and the MSEI had set Friday expiry for its SX40 contracts. Also read: Sebi eases ESG rating rules. But experts warn of short-term risk The exchange offers trading but generates minuscule daily volumes at 30,950 on 5 May. By contrast, NSE's cash trading volumes on May 5 stood at 293.72 crore, while for BSE it was 58.59 crore. MSEI was betting that an independent derivative expiry day would help it gain some market share from NSE and BSE. Sebi's plan could thwart MSEI's bid to position itself as an alternative to its more established and larger rivals, experts said. 'It is highly unlikely that the market regulator will allow a separate day expiry for MSEI because then it circumvents Sebi's original plan to reduce the number of weekly expiries," said a broker on the condition of anonymity. If the exchange does not get a separate expiry day, it will have no economic value, the broker said. Established in 2008 by Jignesh Shah and associated entities, it was previously known as MCX-SX. Shah was allegedly involved in the National Spot Exchange Ltd fraud, which came to light in 2013--he denied wrongdoing. Also read: Primary markets see a slow start to 2025 amid increased volatility Sebi published a consultation paper on March 27, proposing that all equity derivatives contracts of an exchange should either expire on Tuesdays or Thursdays. This would provide 'optimal spacing between expiries in a week and avoid concentration risk". If all exchanges have expiries on the same day, traders might naturally go where there's the most liquidity, like NSE or BSE, said Nilesh Sharma, executive director and president (broking) at SAMCO Securities. Sharma said traders will always prefer better price discovery and liquidity, which is available on the NSE and BSE. Latika Kundu, managing director and chief executive of MSEI, said that as a market infrastructure institution, it has been entrusted with the responsibility of building markets that support the country's economic growth. To reach India's goal of becoming a developed nation, it needs multiple players to help build competitive capital markets, she said. To create a healthy competitive environment, there has to be an enabler, an exclusive expiry assigned to MSEI in this case, Kundu said. 'If that is taken away, we risk reverting to a duopoly or even monopoly, as the equity cash and equity derivatives markets are interdependent on each other." Brokers and investors were betting on the revival of MSEI. Its unlisted shares traded for about ₹ 2 apiece for years. However, after Zerodha and Groww's entry in December, the indicative share price touched ₹ 9 and went to ₹ 12 in January, before falling to trade at ₹ 6 currently, according to data from Unlisted Arena, which trades in unlisted and delisted shares. Zerodha and Share India Securities declined to comment, while queries emailed to Groww and Securocorp Securities India remained unanswered. An email sent to Sebi also remained unanswered. Apart from the SX40 index, the MSEI also offers the SX Bank index. The Nifty 50 futures on the NSE, expiring on May 29, recorded a volume of 76,211 contracts. The Sensex futures contract on the BSE, set to expire on May 26, saw a modest volume of 136 contracts. The MSEI's SX40 futures contracts show zero trading volume. Sebi's expiry proposal is just one of the issues plaguing MSEI. Not many brokers offer the exchange's contracts to their clients. It also lags its peers in infrastructure required to carry out these derivative trades seamlessly. 'The contracts on the MSEI exchange are live, but for trading volumes to build, brokers must obtain the necessary licences from the exchange and bring in customers," said Suvajit Ray, head of products of IIFL Capital Services Ltd. 'Once licensed, brokers can offer these contracts, but actual volumes will depend on customer participation—placing trades, paying premiums, and engaging in settlements." Ray added that if not immediately, then gradually, once the exchange's infrastructure is in place, governance standards are met, and operational processes are streamlined, MSEI could function like any other exchange. 'It may start with lower volumes and fewer participants, but as brokers come on board and traction builds, we can see volumes." Also read: Mint Primer: Why Sebi wants investors to skip opinion trading Kundu of MSEI said the exchange has already started upgrading the technology of its network, infrastructure and systems to ensure seamless connectivity and a better trading experience for members.
