Mumbai: Even as industry bodies discuss ways of boosting the secondary market, neither the market regulator nor the stock exchanges are considering how to bring a balance between the equity and derivatives markets.
In 2013 the total turnover on both the Bombay Stock Exchange and the National Stock Exchange in the derivatives trading was '452,33,189.46 crore whilst the equity segments saw a mere Rs 3,335,580.56 crore.
The derivatives segment accounts for 80-90 per cent of the total market in terms of transactions and turnover and if derivatives figures are set aside, there would be hardly any trading in equities for the exchanges to justify their exalted positions.
A broker who did not want to be named said, “it’s the tail wagging the dog.” He said “it’s a totally speculative market in the guise of providing hedging facilities. It would be interesting to see who is hedging.”
In terms of transactions the derivatives segments saw 1,534,727,675 transactions in 2013 against 17,988 lakh trades in the equity segment.
Ashish Chauhan, managing director of the Bombay Stock Exchange admitted that over the last ten years the stock markets have shifted primarily to the derivatives markets.
He said, “some introspections needs to be done by exchanges and others into the usefulness of this pattern of trading in channelising the savings of the people into productive assets.”
Interestingly Mr Chauhan also made this observation at a capital market summit in Mumbai on Wednesday, but the Sebi chief U.K. Sinha did not respond to it.
BSE had in its Budget recommendations for the capital markets proposed that the securities transaction tax should be restructured so that STT on equities which is basically for investment need is brought down and made the lowest. Futures should be higher. Options should be even higher.
It suggested that this should be applicable across asset classes — stocks, non-agricultural commodities, currency, interest rate etc. In essence, it said a new transaction tax structure needs to be put in place to ensure there is no tax arbitrage across asset classes.
