Ashishkumar Chauhan, BSE Managing Director & CEO, recently received a second term as the oldest stock exchange’s CEO. The exchange was itself listed earlier this year in keeping with new regulations that recommended de-mutualisation. Life hasn’t changed much following the listing, he said, given that they were already following a number of the norms voluntarily.

He bristles at the suggestion that the BSE has to recover lost ground in trading volumes and replies, and responds with a touch of sarcasm to highlight what he thinks is a narrow view. He argues that on various parameters, his exchange has a bigger share. Excerpts:

What will your priorities be in your second term as CEO?

Ours is a compliance organisation. Our first and foremost job is ensuring compliance of companies listed and the brokers who are doing the business of intermediation. If we can remain the most compliant exchange in the country, we would be happy. That was the framework we had kept even during my first term.

Evolution happens, situations change, and more instruments come into the market, but it is compliance that brings trust to the system. It is a subtle thing. If you can continue to show better compliance vis-a-vis the standards set by regulators and the public for exchanges, people will trust you more with their money, and we will become a more investor-friendly exchange. We will continue to strive for that. We have been the investment exchange of India for 142 years. Going forward we have to maintain that.

How has life changed for you as a listed entity?

BSE has been a regulator. It had to measure itself against the best governed enterprises even when it was not listed. It had to do quarterly results, conference calls, board management and all the other requirements that come with listing, even earlier. In 2007, it became a corporate . It has always functioned like a listed company. We had a large number of shareholders — about 9,500 — even when we were not listed.

But the pressure of people holding shares was immense (not that everyone wants to exit on the same day) because everyone wants to have an option and a pricing which is market-determined. Earlier, there was no liquidity. Listing has certainly helped reduce that pressure on the management. In terms of transparency, it is not much different from what was there earlier. Yes, we have a distributed ownership, a well-respected and eclectic board drawn from judiciary, bureacracy, corporates, etc.

What will it take to get back a significant degree of market share from your competitor?

Sometimes, you make up your mind that something is important. Take Olympics, for example; you may think the 100 metres race is the most important. Even if we win all other medals, say boxing, swimming or other athletics, you remember only the 100 metres race. The situation (which represents a kind of tunnel vision) is similar here.

If you think the only purpose of the exchange is to trade, and the measure of success or failure is only about trading, and not about how much investors are making or other measures, you have to look at that parameter. The media seems to have figured out that it is the only measure. What is the real purpose of a stock exchange? It is to channelise savings from households to corporates and send signals for asset pricing in the economy.

We have about 65 per cent share of listings. About 5,100 companies are listed, whereas the others have less than a third with them. The market cap of the companies listed is larger on our exchange. Yes, in equity trading and derivatives, we are lower. But we are larger in currency trading. In the offer-to-buy and offer-to-sell markets, we have 95 per cent share. In SME listings, we have 75 per cent of the market. In corporate bond, we have 70-75 per cent of the market.

We are doing what matters for India. We are the investment exchange of the country. We are not a speculative exchange. We are thought leaders in all the main areas of investment. We have a much larger footprint and a much better technology capability. When people want to invest, they remember the BSE.

The SEBI chairman recently observed that more money was being returned through buybacks than was being raised through fresh issue of capital. What are your views on this?

It is a good observation. Sometimes things do happen in a particular way. There is a differential in the tax treatment between dividend distributed and buyback.

People go towards the most tax-efficient way of doing things. If the same amount is distributed as a buyback, usually long-term capital gains tax applies, and there is no tax. If the same amount is given as dividend, it is taxed at the distribution side and also later in the recipient’s hands beyond a certain level.

So, while on the one side, tax incidence will be 30-35 per cent, the other side could be zero. That is why people prefer buybacks. That’s how I would read the situation: that it has more to do with tax arbitrage.

The capital gains tax exemption is something the government needs to look into, on how and what concessions you want to provide to promote a certain type of behaviour.

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