BSE board decides to wholly take over struggling exchange USE

The board of the Bombay Stock Exchange, the largest stakeholder in the virtually defunct United Stock Exchange, has decided to wholly absorb USE within itself.

This move will help the BSE's own stressed currency trading business, currently dominated by its rival the National Stock Exchange (NSE).

A BSE spokesman on Thursday confirmed the board approval for the merger, and said they will soon be seeking approvals from regulatory authorities including the Securities & Exchange Board of India (Sebi) and other regulatory bodies for the transaction; and added that the move is backed by the USE board.

The USE has not only been facing dwindling volumes but also erosion of its net worth. The BSE board has valued USE at around Rs150 crore and its own at about Rs4,000 crore, a spokesman for the exchange said.

Under Sebi rules, say an exchange should have a net worth of Rs100 crore at all times. But USE's net worth has been eroding and it may not be able to sustain this standard for more than a few quarters.

According to a financial statement issued by USE at end-December 2013, its net worth stood at Rs118.13 crore.

The merger with USE will mean an equity capital dilution of around 3 per cent for BSE. After the merger all shareholders of USE, mainly commercial banks, will be added as additional members on BSE, the exchange said.

USE, promoted by the Jaypee Group, had created a record by registering a turnover of Rs45,486 crore on its inaugural day in 2010, but since then its volume has been plunging due to competition and lack of infrastructure.

Its volumes stood at a paltry Rs274.97 crore on Thursday, where BSE's currency derivatives turnover stood at Rs4,887 crore and that of NSE at Rs9,542 crore.