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Informist, Thursday, Feb. 6, 2025

By Anshul Choudhary and Aman Aryan

MUMBAI – It is difficult for BSE Ltd. to forecast the settlement guarantee fund contribution it may need to make for each quarter, said Sundararaman Ramamurthy, BSE's managing director and chief executive officer, in a conference call with analysts. This is due to the new methodology given by the Securities and Exchange Board of India last year, which led to a sharp increase in contribution to the settlement guarantee fund, he said.        

In a circular in October, SEBI introduced some stress testing methodologies to calculate the minimum required corpus for the core settlement guarantee fund in the equity derivatives market. "...this computation methodology has three stress test models...when we apply this along with price shock as stipulated, the minimum required corpus has significantly increased," Ramamurthy said. During the December quarter, the company on a consolidated basis contributed INR 1.99 billion to the settlement guarantee fund, which was a sharp increase from just INR 2 million a quarter ago and INR 917 million a year ago.

"The core SGF computation is dependent on a number of factors, making itself unamenable to a linear extrapolation," he said. "Given that, periodically to forecast, what it could be next quarter becomes difficult." While he acknowledged that the outgo towards this fund is likely to be volatile, he said higher outgo should be seen as a sign of addition of members and higher open interest from existing members.

Ramamurthy said they have seen the quality of premiums improving during the quarter, which is the reason behind BSE showing quarter-on-quarter improvement in average daily premium turnover despite total contracts coming down. The company's average daily premium turnover in equity derivatives during Oct-Dec increased nearly 7% on quarter to INR 87.58 billion. "The premium quality improves if participation is for longer dated and also on all days of expiry...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, it has significantly increased," he said.

Ramamurthy acknowledged the traded volumes in its Bankex index have taken a big hit due to SEBI's guidelines last year. The regulator had announced a slew of measures last year, which included reducing the number of derivative contracts and expiries. He said the volumes in BSE Bankex derivatives had gone down by 95% and they are working to improve that. "...(we are) encouraging people to consider strategies which suit the monthly cycle and helps them to take a long term view," he said.

Updating on the company's subsidiary Asia Index Private Ltd., Ramamurthy said the subsidiary launched 15 indices so far this financial year. Asia Index is in the process of launching more indices by the end of March, he said.

BSE reported its December quarter earnings post market hours Thursday. BSE's consolidated net profit for Oct-Dec was INR 2.2 billion, down 36.7% from the previous quarter. Its consolidated revenue rose nearly 4% on quarter to INR 7.74 billion.  End

Edited by Akul Nishant Akhoury

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