USE plans stake sale through fresh issue

United Stock Exchange (USE) plans to sell shares in the exchange to a fresh set of stakeholders through issue of new capital.

An extraordinary general meeting to discuss the same is likely to be held soon, said a source. “The exchange plans to bring on board some large brokers, or people who can bring some depth and liquidity to the market.”

A USE spokesperson declined comment.

USE accounted for 2.7% of the total currency volumes in December, up from 0.2% from the April-June period, but below a stated goal of 10% share in total turnover. Rivals MCX Stock Exchange and National Stock Exchange accounted for 34.3% and 60.7%, respectively.

The source said the exchange has already sounded out some potential investors and is in the process of identifying some more.

The process of increasing the exchange’s share capital and completing the stake sale is likely to take 3-6 months.

USE already has 21 public sector banks, six private sector banks, and one foreign bank as its stakeholders, in addition to MMTC, Jaypee Capital Services, Indian Potash and BSE.

The reason for bringing large brokerages as stakeholders is to help increase volumes, said the source.

The management is said to be of the view that if large players in the currency market hold a stake in USE, they are more likely to bring their volumes to the exchange. Banks for which the exchange may not be a significant investment are less likely to do so.

By bringing in multiple large players, the exchange would also avoid a situation like the one earlier when it faced regulatory scrutiny after a couple of entities accounted for the majority of volumes, said the source.

USE currently allows users to trade derivatives based on the exchange rate of the rupee against a variety of currencies, including dollar, euro, pound and Japanese yen.