Indian Powerhouse Bombay Stock Exchange Edges Closer to Acquiring Rival USE

Shareholders at the Bombay Stock Exchange have granted the firm approval to continue its proposed merger with troubled currency trading

One of Asia’s most established and oldest exchanges is expected to strengthen its offerings as its proposed merger of a competing exchange gains approval from its shareholders.

The Bombay Stock Exchange’s (BSE) proposed merger with the United Stock Exchange (USE) has been granted approval by the BSE’s shareholders, thus laying out positive signs for the BSE as it challenges rivals, NSE & MCX for FX trading.

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In filings issued by the court, equity shareholders of the BSE voted in favour of the venue’s decision to acquire the currency focused exchange, USE.

The merger, that was initially proposed in May earlier this year, will proceed to its next phase where both parties will now be filing necessary petitions at the financial capital’s High Court seeking its sanction to the proposed scheme.

BSE aims to enhance its current stake in USE which stands at 14.56 per cent. USE is one of India’s most recent exchanges, the venue was launched in 2010 and offers a range of currency futures contracts against the rupee.

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The latest news follows on from a spree of yes votes the BSE needs before the merger is accepted. The Competition Commission of India (CCI) and the Securities and Exchange Board of India (SEBI) have already given their approval to the proposed merger.

The USE and the BSE are part of a pact of exchanges that offer connectivity to India’s thriving currency derivatives market. The USE represents the commitment of 26 public and private sector banks and allows trading in four currency pairs – USD/INR, EUR/INR, GBP/INR and JPY/INR USE.

Forced Merger

India’s financial market operators were also informed about the first forced merger in the country between fraud-ridden NSEL with its technology provider, FTIL. The government issued a notice to merge the two interests in the interest of public safety. Over 13,000 investors were affected by the alleged fiasco, with the firm’s directors facing criminal proceedings.

The BSE was the most recent entrant into India’s currency trading sector. The exchange has seen strong gains in its trading volumes since launching in autumn last year, the firm  surpassing USE in its market share. The BRICS nation introduced currency futures in 2008, in its initial launch period two exchanges offered the INR/USD contract, in addition users benefited from commission free trading as exchanges aimed to increase trading volumes. During its peak, the average daily trading volume was above $5 billion.

India’s currency, the rupee, was one of the worst performing in 2013 after facing a 20% drop against the greenback. Since the country elected a new prime minister markets have stabilised and the currency has recovered, however still trailing in the red zone.

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