What would be the impact and advantage from the merger of NSE and MCX?


NSE, MCX merger under discussion

NSE wants to establish its presence in commodities and MCX wants to establish its presence in equity.

According to official reports, The National Stock Exchange (NSE) and the Multi Commodity Exchange (MCX) entered into merger discussions at the forefront of the execution of the universal exchange framework in October. Reports added that the two monopoly exchanges are in the process of submitting the proposal to market regulator Securities and Exchange Board of India (Sebi) this month.

As we all know that SEBI had passed the circular in December 2017 that exchanges can dip into both the equities and commodities space. Both the exchanges have geared up a blueprint for the merger proposal which will be discussed with Sebi.

NSE which already has a strong grip in equity and index derivatives wants to be leader in the commodity segment as well according to sources.

Impact and advantages of the merger:

The current scenario depicts a great opportunity for the commodity market to develop. So, having a leading player will help bring in lot of economies of scale.

In the equity derivatives space, NSE is the monopoly, while in commodity derivatives MCX is the monopoly.

The merger will help NSE and MCX fortify their headship spot both in the equities and commodity derivatives space.

There is always an interconnection between the Clients – Member – Exchanges. All the three will be benefited in this regard.

With the option of trading under a single entity, the client is benefited as his trading need is met under a single roof, the member is benefited and the load of the exchange comes down as well.

The Manpower Management cost, the operational cost in every department, the training cost, say the awareness programmes and other seminars are all conducted separately involving more time and cost as it functions separately. The merger would help save time and cost in every possible way with a single sided contact.

What do market experts analyse about the MCX and NSE merger?

According to Ponmudi, Managing Director of Enrich commodities and Market expert, the merger could be a success for both exchanges as competition is set up to strengthen post October as all existing houses will look to venture into new segments.

BSE has already announced its plan to enter in to commodity derivatives.

MCX will face sturdy competition from the equity exchanges, which debatably have much superior technology and client base.

MCX will need huge capital if it wants to assertively venture into the equities space.

MCX had earlier launched, MCX SX 40 , but the outcome was not much as it was expected.

The proposal could also address NSE’s pet peeve–going public. Regardless of mounting shareholder pressure, NSE has not been able to list due to legacy issues. As MCX is already listed, the merger could lead to back-door listing for NSE

On the closing note, Mr.Ponmudi added – this merger between NSE and MCX would be a healthy move benefiting the clients, members, exchanges and the growth of India as well.

   
 
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