Finance ministry to meet officials of all bourses

The Union finance ministry has called a meeting of top officials of the stock and currency exchanges regulated by the Securities and Exchange board of India (Sebi) in first week of August.

The National Stock Exchange, Bombay Stock Exchange, MCX Stock Exchange and United Stock Exchange have been invited for the August 6 meet.

It will discuss fast-tracking of SME exchanges, infrastructure issues, trends in the market, recent reduction in volumes in secondary markets and third-party warrants.

The agenda also allows discussions of "any other relevant issue" with the permission of the chair.

"The talks are about routine stuff like algorithmic trading, infrastructure and volumes. But eventually talks will move towards contentious issues like the Bimal Jalan committee recommendations. It is still a live issue," said a senior exchange official.

Despite changes in structure several times, SME exchanges have been a non-starter and yet to go live on anywhere.

Algorithmic trading has become an area of controversy over the past couple of years. Developed market exchanges like the London Stock Exchange had up to 40 per cent of trades originating from algorithmic trading systems as early as 2006-07.

However, the Bombay Stock Exchange, which is trying to make inroads into the NSE-dominated equity derivatives market, has accused its rival of deliberately slowing

things.

In 2009, BSE's James Shapiro had alleged in a public forum that NSE was deliberately not clearing algorithms so that the volumes were not diverted to BSE. In response, NSE had argued it was putting in safeguards to avoid systemic issues.

Differences between the rival exchanges have surfaced every now and then during the implementation of technology advancements like smart-order routing and co-location servers, leading to intervention by market regulator Sebi.

Retail investor participation has remained static over the past few years, despite penetration of terminals and quality of services increasing substantially.

While these issues will be mulled, the main agenda will be to build a consensus on the Bimal Jalan panel recommendations.

These have evoked extreme reactions among all stakeholders in the exchange business, including managements, investors, regulators and customers.

What was constituted as an internal Sebi committee has got national attention following hectic lobbying by stakeholders in various fora.

BSE and MCX SX have already expressed their displeasure over most suggestions made by the Jalan panel.

NSE has supported Jalan's view on separation of regulatory and commercial functions of exchanges.

This is the second time in the recent months that the government is directly meeting Sebi-regulated intermediaries.

The government interference in Sebi's exclusive jurisdiction had raised concerns over the autonomy of the market regulator.