Daijiworld Media Network – Mumbai

Mumbai, Jul 12: Asia’s oldest stock exchange, the Bombay Stock Exchange (BSE), finds itself in the eye of a storm just as it prepares to mark its 150th anniversary. A recent report highlighting rising retail trader losses in equity derivatives has fueled fears of regulatory crackdowns, threatening to dampen celebrations.

These jitters intensified after the Securities and Exchange Board of India (SEBI) barred US-based trading giant Jane Street Group from local markets, accusing it of price manipulation that hurt small investors — allegations Jane Street has denied.

The developments have cast a shadow over BSE, whose recent growth has been powered by a surge in derivatives trading. While BSE’s revenues soared in recent years, thanks to the options boom, SEBI’s tightening grip has already slowed the momentum.

"The exchange that offers innovative products which safeguard retail investors from high-frequency traders will capture future volumes," said Deven Choksey, MD, DRChoksey FinServ Pvt.

BSE shares tumbled sharply on July 4, continuing a downward slide triggered by investor unease. Once riding high with a 900% gain over two years, the stock has now dropped 21% from its June peak and hit a two-month low on Friday.

Jefferies Financial Group estimates that lower volatility and the Jane Street ban caused a 25% drop in index options turnover on July 4, the first expiry since the curbs. This could trim BSE’s earnings per share by up to 4% this fiscal year.

“Easy gains may be over for BSE,” said Sonam Srivastava, founder of Wright Research. “Now it must deliver on hopes of long-term structural changes.”

Founded in 1875 by cotton trader Premchand Roychand as the Native Share & Stock Brokers' Association, BSE grew from a gathering under a banyan tree near Mumbai’s Town Hall into a major institution. It launched the iconic Sensex in 1986 and now boasts over 5,000 listed companies.

Despite such legacy, BSE has faced major challenges — most notably the 1992 Harshad Mehta scam that led to sweeping market reforms and the rise of the fully electronic National Stock Exchange (NSE) in 1994. Since then, NSE has dominated the cash market, with BSE’s share stuck at 6%.

Still, BSE CEO Sundararaman Ramamurthy said recent efforts to boost transparency and technology have paid off. Derivatives linked to Sensex and Bankex now contribute more than half the exchange’s revenue, he noted.

“Sensex index derivatives are now the world’s fastest-growing derivatives contract,” Ramamurthy said.

For longtime shareholder Siddharth Balachandran, Dubai-based investor and largest individual shareholder after LIC, SEBI’s interventions are positive. “They reinforce the foundation of credibility,” he said. A decade-long investor in BSE, Balachandran also holds NSE shares.

“I see BSE as a proxy for India’s growth story,” he said. “My strategy is to align with institutions that can stand the test of time — and BSE was the obvious choice.”