Why the NSE Outshines the BSE: A Comprehensive Analysis
In my 15 years of trading experience, I have had the opportunity to engage with both the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). Despite BSE being the first stock exchange established in India, it has consistently been outshone by its younger rival, NSE, in various aspects. Let's delve into the factors that make NSE the standout choice.
Why NSE Reigns Supreme: Advanced Technology and Transparency
At the heart of any successful stock exchange is its technological infrastructure. NSE takes the lead in adopting cutting-edge technology, including full automation in its trading system. It was NSE that pioneered the use of advanced technology in the Indian trading environment, setting a high bar for other exchanges. This innovation not only enhances the efficiency of trading but also ensures a high level of transparency. BSE, while not lagging behind, has also had to adopt similar technological advancements to stay competitive, but NSE remains the frontrunner in this domain.
Traffic and Liquidity: Where NSE Dominate
The trading volume on NSE is significantly higher compared to BSE. This is due to several contributing factors, including NSE's widespread geographic presence, which extends to over 1500 cities, in contrast to BSE's limited coverage of only 450 cities. Even though BSE hosts more listed companies, the trading volume on NSE is higher, indicating greater liquidity. This increased liquidity is crucial for investors, as it ensures easier and more efficient trading.
Commodity Trading Monopoly: NSE's Dominance
When it comes to commodity trading, NSE has established a near-monopoly. For investors looking to invest in derivatives of oil or metals, NSE is the only platform available. This market dominance is a result of NSE’s proactive approach in launching and operating new commodity contracts. The exchange has taken multiple initiatives to streamline the process, making it easier for traders to navigate the commodity market.
Perception and Government Involvement
There is often a perception that NSE is managed by the government, likely due to the "National" in its abbreviated name. While it is true that the government does hold a significant stake in NSE (over 50% of shares), this stake does not imply that the exchange is directly managed by the government. In reality, NSE is a self-regulating organization managed by financial institutions. However, this perception may contribute to the belief that the exchange is more stable and trustworthy. Furthermore, NSE’s adoption of online trading and the Nifty derivatives have significantly boosted its popularity among investors.
Conclusion: Considering the factors of advanced technology, higher trading volume, and commodity trading monopoly, it is clear why NSE is widely regarded as a better exchange than BSE.