Madras SE members to trade directly on NSE

The National Stock Exchange has decided to permit members of the Madras Stock Exchange to trade directly on the NSE in both cash and F&O segments.

The facility will be made available from November 5 under an arrangement between the NSE and the Madras Stock Exchange (MSE). SEBI has approved the deal, an official of the national bourse said.

Under this arrangement, MSE members trading on the NSE terminal will issue their own contract notes as members of MSE. The funds and securities for the trades will be routed through the MSE. Members’ capital adequacy requirements will also be according to the norms applicable at the MSE. However, the exposure limits and margining will be according to NSE rules, said an official of the Madras Stock Exchange. They would also have to follow NSE compliance requirements.

SEBI had permitted regional stock exchanges membership on national stock exchanges through their subsidiaries, which were allowed to trade only in the cash segment. For this purpose, the MSE had floated a subsidiary, which somehow remained non-operational and would now be wound up as MSE members can directly trade on the NSE.

The national bourse has also allowed stocks listed on the Madras Stock Exchange to be traded on the NSE terminal under the “permitted category”. This is for the first time after 2003 that the NSE is allowing trading of shares in the permitted category.

These stocks will be selected on the basis of certain parameters, including compliance, track record and financial performance, said an official at MSE.

The move is expected to help small and medium companies (which are not eligible to get listed on the NSE) have their shares traded on NSE, thereby getting better liquidity and fetching better valuations, the official said.

Though the number of stocks to be allowed to be traded on the NSE is not known, an official said more than half of the MSE-listed scrips will be traded.

The tie-up, the first one for the NSE with a regional exchange, is expected to help the former to boost its trading volumes and turnover. The national bourse is open to similar arrangements, said an official.

NSE’s idea is always to be more inclusive in its expansion, said the official. “So, if there is a regional exchange which somehow wants to provide a new business model for its members, we are always ready to work out how that can be done.”