BSE Limited — Q3 FY25 earnings call

As far as core SGF is concerned, as you would be aware, SEBI came out with a recent circular dated October 1, 2024. Basically, it enhances the stress testing framework for equity derivatives. Under that it defines a minimum required corpus. This computation methodology has actually three stress test models... the net core SGF requirement, which we needed to provide for this quarter came to around Rs. 199 crores, of which Rs. 147 crores were to be contributed by ICCL and Rs. 53 crores were to be contributed by BSE... the overall volumes in Bankex have significantly fallen down almost by around 95%. Sensex notional volumes have fallen down marginally, and premium volumes have almost remained stable for most of the part and is showing an increasing tendency because of the activity we see on non-expiry days owing to the change in the expiry day.

Explains the reason for the significant increase in core SGF contribution and the immediate impact of regulatory changes on derivative trading volumes.

Asked by Vivek Patel

In terms of core SGF, you may recall, we have always been telling that the core SGF computation is dependent on a multiple number of factors making itself unamenable to a linear extrapolation... On clearing and settlement business, it is very early days. There is a consultation paper available. If you look at the principle, which is guiding the regulatory thought process in respect of clearing and settlement... it has to be very independent. That is the direction in which the regulators are thinking. So, when you say independent, the shareholding should be such a passion that it makes it independent.

Addresses the non-linear nature of SGF calculation making future projections difficult and discusses the regulatory intent behind potential clearing corporation demerger, which could impact BSE's revenue stream.

Asked by Prayesh Jain

For us, one of the most important requirements from an institutional front is common contract note... The second is the retail volumes. Today, notwithstanding all the regulatory directive and intentions to ensure a level playing field on the capability of the client to choose the best price for execution, the software provided by the systems and front ends provided by many of the market participants are far from being satisfactory. We are working with every one of them... In respect of the differentiation in the charging structure, I will certainly consider this.

Outlines the key strategies (common contract note, improved software for best price execution) and potential new charging structures to boost BSE's equity cash market share.

Asked by Sudarshan

The percentage of volume traded of Sensex derivatives on expiry day has consistently fallen down and the other days, including the next day of expiry i.e. E-4 days, if I were to call has significantly increased. In fact, on many days from what the past numbers were, I find it 4x to 5x more... FPI participation is 5%. Many of the FPIs, who have converted themselves as brokers in India, one by one, they are also taking registration with BSE... we do have a big waiting list. As you know, we are working on providing extra colo space, and we are in the process of implementation.

Provides updates on the success of efforts to improve derivatives premium quality, FPI engagement, and the ongoing plans to expand colocation facilities to meet demand.

Asked by Sudarshan

The new MRC difference came for us to Rs. 481 crores. And in that, we have already been permitted a onetime transfer of excess funds from equity cash segment to the equity derivatives segment... the resultant balance, which we needed to provide for, was around Rs. 199 crores. Roughly, you can take it as Rs. 200 crores of that, Rs. 150 crores was to come from ICCL and Rs. 50 crores had to come from BSE, which we have done.

Clarifies the exact SGF contribution for the quarter, distinguishing between the total required increase and the net amount contributed by BSE after permitted transfers.

Asked by Devesh Agarwal

Already, as we have started monetizing the colo to the extent of racks rent, which is competitive rent now... we are not charging anything in a meaningful way, very, very small token of a charge is what we have introduced... we started with almost no colo facility with hardly any the number of racks with us. And subsequently, we had a significantly large number of racks, almost the total rack, the total now, which we have crossing somewhere around 200, 220 racks is what we currently have. Is that a good number or a sufficient number? No. We do have a big waiting list. As you know, we are working on providing extra colo space, and we are in the process of implementation.

Details the current status of colocation facilities, the monetization strategy, and the ongoing efforts to expand capacity to meet high demand.

Asked by Devesh Agarwal

As you rightly observed, we if you look at the total number of contracts and the average notional daily turnover they have consistently -- they have fallen down compared to the previous quarter. If you look at it in Q2 FY '25, my average daily notional turnover of around Rs. 128 lakh crores basically. It has come down to Rs. 105 lakh crores in the last quarter, whereas the average daily premium has marginally gone up from Rs. 8,203 crores to be precise to Rs. 8,758 crores, it has gone up. So, in this process of premium improvement, what happens is one is the quality of premium is going up with lesser number of contracts. Second is, therefore, the clearing and settlement charges and the regulatory fee, which are based on a number of contracts traded they come down. That is the way it is benefiting us.

Explains how the shift towards higher quality premium turnover, despite fewer contracts, leads to operational benefits through reduced clearing and settlement charges and regulatory fees.

Asked by Sanidhya