The Stock Exchange, Mumbai, popularly known as "BSE" was established in 1875 as "The Native Share and Stock Brokers Association", as a voluntary non-profit making association. It has evolved over the years into its present status as the premier Stock Exchange of the country. It may be noted that this Stock Exchange is the oldest one in Asia, even older than the Tokyo Stock Exchange, which was founded in 1878

A Governing Board having 20 directors is the apex body, which decides the policies and regulates the affairs of the Exchange. The Governing Board consists of 9 elected directors, who are from the broking community (one third of them retire ever year by rotation), three SEBI nominees, six public representatives and an Executive Director & Chief Executive Officer and a Chief Operating Officer. The Executive Director as the Chief Executive Officer is responsible for the day-to-day administration of the Exchange and he is assisted by the Chief Operating Officer and other Heads of Departments.

A President, Vice-President and an Honorary Treasurer are annually elected from among the elected directors by the Governing Board following the election of directors. However, as per SEBI Orders issued in March 2001, the elected directors have been restrained from acting as directors and the Governing Board presently comprises of only 10 directors, viz., three government nominees, a RBI nominee, five public representatives and Executive Director.

The Exchange has inserted new Rule No.126 A in its Rules, Bye-laws & Regulations pertaining to constitution of the Executive Committee of the Exchange. Accordingly, an Executive Committee, consisting of three elected directors, three SEBI nominees or public representatives, Executive Director & CEO and Chief Operating Officer has been constituted. The Committee considers judicial & quasi matters in which the Governing Board has powers as an Appellate Authority, matters regarding annulment of transactions, admission, continuance and suspension of member-brokers, declaration of a member-broker as defaulter, norms, procedures and other matters relating to arbitration, fees, deposits, margins and other monies payable by the member-brokers to the Exchange, etc.

• The average daily turnover of the Exchange during the financial year 2000-2001 (April-March), was Rs.3984.19 crores and the average number of daily trades was 5.69 lakhs.

• The average daily turnover of the Exchange in the subsequent two financial years, i.e., 2001-02 & 2002-03, has declined considerably to Rs. 1248.15 crores and Rs. 1251.29 crores respectively.

• The average number of daily trades recorded during 2001-02 and 2002-03 numbered 5.17 lakhs and 5.63 lakhs respectively. The average daily turnover and average number of daily trades during the quarter April-June 2003 were Rs. 1101.05 crores and 5.70 lakhs respectively.

As reason for the fall in business volume,the exchange points out that the ban on all deferral products like Borrowing & Lending of Securities Scheme (BLESS) and Automated Lending & Borrowing Mechanism (ALBM) in the Indian capital markets by SEBI w.e.f. July 2, 2001, abolition of account period settlements, introduction of Compulsory Rolling Settlements in all scrips traded on the Exchanges w.e.f. December 31, 2001, etc. have adversely impacted the liquidity in the market and consequently there is a considerable decline in the average daily turnover at the Exchange as reflected in above statistics.

Before establishment of NSE in November 1992, BSE remained a virtual monopoly organisation in the Indian Stock Market. It adapted to the new situation of the emerging market and continues to remain as one of the premier Stock Exchanges of India. It is pertinent to quote again Mr.Manoj Vaish, its Dy.ED in this respect.

"Though a monopoly for more than a century, it did not take much time for BSE to quickly adjust to the emerging competition. In the last few years BSE initiated several firsts. To name a few; it is the first stock exchange in India to-

1. "introduce a free float index

2. "commence trading derivatives

3. "design U.S. Dollar versions of major stock indices (Dollex 30 and Dollex 200)

4. "introduce centralised exchange managed internet trading platform

5. "it offers compensation to investors in case of defaults by members, which is highest amongst Indian Exchanges

6. "it is very fast in adopting best practices. It uses state-of-the-art risk management and position monitoring systems that enabled it to record very few defaults despite major payment crisis that engulfed the Indian capital markets last year (2001-02)"

The investors can trade at the Exchange either through the members of the Exchange or through the sub-brokers, who are registered with SEBI through the members. An individual or a company formed in compliance with the provisions of Section 12 or Section 322 of the Companies Act, 1956 can become a member of the Exchange.

Minimum 2 years' experience as a partner or authorized clerk or apprentice with a member of the Exchange or in other connected areas in capital market.

A company, seeking membership of the Exchange, should have a minimum paid-up capital of Rs. 30 lakhs. Besides, minimum of its two directors should be appointed as designated directors, fulfilling the criteria for individual members, except the criteria relating to citizenship. The companies, which have become members, are known as corporate members of the Exchange.

The applications for membership submitted by the applicants fulfilling various criteria as discussed above, are scrutinized by the Membership Committee appointed by the Exchange and the Committee recommends the same to the Governing Board. The applicants then get elected by the Governing Board. After paying the requisite fees, the applicant is admitted as the member of the Exchange and application is then forwarded by the Exchange to SEBI for registration. After getting SEBI registration, a member is required to comply with the requirements of net-work connectivity, insurance, maintenance of base minimum capital, opening of accounts with Clearing House and Clearing Bank etc. and thereafter, he is allowed to commence business on the Exchange.

An individual, a partnership firm or a body corporate can become a sub-broker provided he satisfies the criteria relating to educational qualifications, experience, etc. and is affiliated to some member(s) of the Exchange. After scrutinizing the applications submitted by the sub-brokers, the same are forwarded to SEBI for registration. Once a sub-broker obtains certificate of registration from SEBI, he can commence business as a sub-broker. It may be noted that the sub-broker is an agent of the member and is allowed to issue confirmation memos to his clients for their transactions done by him through the main member-broker to whom he is affiliated. The number of sub-brokers registered with the Exchange as on June 30, 2002 was 5000 (approx).

In order to provide an additional service to investors, the Exchange has introduced a concept of Remisier. Remisier is an entity which brings business to the member-broker and gets commission for the same. An individual or a partnership firm is eligible to become a remisier. An application for remisier is required to be approved by the Exchange. The remisier is not allowed to handle the securities and monies belonging to the clients. The clients get the contract notes issued by the member-brokers for their transactions. The monies and securities are directly exchanged by the clients with the member-brokers.

The Exchange has set up a separate Membership Services Department (MSD) with a view to provide integrated one window services to its member-brokers and their associates. The Membership Services Department has put in place a concept of "Account Manager" whereby an Officer of the Department has been made responsible for providing services to a specific set of members. The Account Managers are in constant touch with the members in their group so that the problems/ issues faced by them can be immediately addressed. The Account Managers co-ordinate internally with other departments and provide the members with the possible solutions within the specified time frame. The suggestions from the members are also solicited by the Department so as to improve the working of the Exchange.

The Exchange has obtained permission from Securities and Exchange Board of India (SEBI) for expansion of its BSE-On-Line-Trading (BOLT) network to locations outside Mumbai. In terms of the permission granted by SEBI and certain modifications announced later, the members of the Exchange are free to install their trading terminals at any place in the country. This resulted in the rapid expansion of BSC far and wide in the country. To quote Mr.Manoj Vaish, Dy.Executive Director of BSE:

"The BSE entered the technology race in 1995 with the introduction of screen based trading. It switched over from the open outcry system in just about 50 days. Considered a rare feet at that time. Two years later it extended its presence nationwide through BSE On-line Trading (BOLT) which now covers about 400 cities. The network now runs on a fault tolerant TANDEM, s74016 which is connected through LAN, WAN and VSAT and has capacity for 20 Lakh trades a day with order execution time being less than a second. Complementing the equity trading platforms are trading platforms for debt, derivatives and Internet trading, which makes BSE a bourse that is technology savvy".

In order to expand the BOLT network to centres outside Mumbai and support the smaller regional Stock Exchanges, the Exchange has admitted subsidiary companies formed by 13 regional Stock Exchanges as its members as on November 30, 2001. The members of these regional Stock Exchanges work as sub-brokers.

The objectives of granting membership to the subsidiary Companies formed by the regional Stock Exchanges were to reach out to investors in these centres via the members of these Exchanges and provide to the investors in there areas access to the trading facilities in all scrips listed on the Exchange.

BSE's On Line Trading System (BOLT) which commenced on March 14, 1995, was essentially meant to create an automated trading environment with the following objectives:

• Transparent deals

• Improvement in Liquidity

• Increase the market depth through continuity of quote and orders

• Eliminate mismatches and mitigate settlement risks

• Instantaneous dissemination of information through various data-feed channels

• Structured MIS reports for analysis

• Provide a robust and scalable trading system for growing volumes

With the emergence of electronic trading, the entire capital market scenario has changed. The securities market then opened out to the end investor through the member-brokers or the sub-brokers situated in far-flung areas in the country. The Exchange, recognizing the opportunities prevalent in the ever-changing scenario, embraced the latest technology and came up with an electronic trading system. The floor used for open-out cry trading was entirely closed down in 50 trading days in March 1995 and the means of conducting business in the capital markets changed forever.

Technology is driving the re-structuring of markets worldwide, shifting focus from a supply-driven approach to customer-centric strategies. This has lead to the emergence of the 'borderless enterprise' which thrives on the creation of new business models, new products and new markets. The benefits of Technology include:

• makes trading accessible--anywhere and at anytime

• pace of communication facilitates a fast response time

• dissemination of data is done at a faster rate

• provides the freedom to create-new systems and new products

• facilitates transparency of information

• provides global connectivity

• increases awareness of market participants through availability of information

BOLT system works on the Tandem S74016 platform running on 16 CPUs. This is one of the latest and largest installations of Compaq in India and compares with the major installations in Asia. The Exchange has set-up, a fault tolerant system with scalable architecture which can handle a maximum of 2 million trades a day as against a daily average of 75000 trades a day when BOLT was started. Further, the average time of execution is 100 orders per second with a peaking speed of 200 orders per second. The system comprises of a Tandem Himalaya S74016 machines acting as backend to more than 8000 Trader Work Stations (TWSs) networked on Ethernet, VSAT and MLDN network

In the year 2000, the Exchange had set up its own satellite earth station (11 metres antenna) in P J Towers, Mumbai with DoT allotting one full transponder in extended "C" band on Insat 3B to BSE. BOLT has expanded to cover 380 cities, including Mumbai, by installing a total of 1463 VSATs and 7536 TWSs as on June 30, 2002. Due diligence has been done to ensure that no single point of failure affects the operations allowing members to trade without disruption.

The Exchange with the help of MTNL has set up a fully fault tolerant MLDN Network consisting of 300- 2mbps lines and 1500- 64 kbps lines within Mumbai and connecting all Regional Stock Exchanges. This Network has enabled the Exchange to conduct trading and settlement in Equities, Derivatives and Debt Segments etc., concurrently, without affecting the quality of service.

The Trading and Settlement System in vogue in BSE is discussed in the next page