BSE to bring clearing operations under arm this month

BSE Ltd, the country’s oldest bourse, hopes bring its clearing and settlement operations under the control of wholly owned subsidiary Indian Clearing Corporation Ltd (ICCL) this month.
Currently, BSE carries out clearing and settlement through a joint venture with Bank of India, called BOI Shareholding, in which the exchange is a minority shareholder — it holds 49% stake against Bank of India’s 51%.

The joint venture would now act as a sub-contractor to the subsidiary and handle its operations, said a source.

The move will help the exchange gain control over the entire securities transaction process, from trading of shares on the exchange platform to clearing and settlement of these trades, or ensuring that the seller gets his money and the buyer his securities.

Last year, BSE had hiked its stake in Central Depository Services Ltd from under 40% to 54.5%. The depository is an institution in which the securities are stored in the electronic form.

A BSE spokesperson declined comment.

A query sent to a Bank of India spokesperson had not elicited a response at the time of going to press.

While the joint venture was set up in 1989, Bank of India has been the clearing house for the BSE since 1921.

The company has been profitable, earning a net profit of `3.09 crore during 2005-06, according to the latest available figures on the Bank of India website.

While announcing its half-yearly results, BSE had mentioned plans to reorganise operations through a court-approved arrangement whereby its clearing and settlement business is transferred to a wholly owned subsidiary.

At present, ICCL undertakes clearing and settlement services for the mutual fund and corporate debt segments of BSE. It also undertakes clearing and settlement functions of the currency derivatives segment of United Stock Exchange of India Ltd.