The Bombay Stock Exchange: Liquidity Enhancement Incentive Programmes

Bang, N P and Sakaldeepi, K H and Thirumalai, R S (2016) The Bombay Stock Exchange: Liquidity Enhancement Incentive Programmes. [Teaching Resource]

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Abstract

In 2013, the chief business officer at the Bombay Stock Exchange needed to prepare a recommendation on whether to pursue liquidity enhancement schemes in the equity cash market. The Bombay Stock Exchange, the oldest stock exchange in Asia, had held a monopoly in India until 1994, when the National Stock Exchange was launched. When derivatives were introduced to the Indian stock exchanges in 2000, the Bombay Stock Exchange had been unprepared, and the National Stock Exchange soon captured the entire derivatives market. In 2011, the Securities and Exchange Board of India approved the introduction of the Liquidity Enhancement Incentive Programmes on illiquid securities in the derivatives segment. The Bombay Stock Exchange then introduced the incentives for various illiquid products in the derivatives segment, but lost profit as a result of the incentives it paid out. Had the Liquidity Enhancement Incentive Programmes improved liquidity in the derivatives segment? Was it worth sacrificing profit to gain liquidity and market share? The chief business officer needed to address the long-term benefits of liquidity enhancement schemes and the merits of introducing such schemes to the Bombay Stock Exchange's equity cash market.

Affiliation: Indian School of Business
ISB Creiators:
ISB Creators
ORCiD
Bang, N P
UNSPECIFIED
Thirumalai, R S
http://orcid.org/0000-0001-9251-6829
Item Type: Teaching Resource
Uncontrolled Keywords: Markets, Liquidity, Stocks, Finance, Bombay Stock Exchange
Subjects: Finance
Depositing User: Gurusrinivasan K
Date Deposited: 17 May 2021 15:07
Last Modified: 17 May 2021 15:07
URI: https://eprints.exchange.isb.edu/id/eprint/1515
Publisher URL: https://www.hbsp.harvard.edu/product/W16839-PDF-EN...
Publisher OA policy: https://www.hbsp.harvard.edu/product/W16839-PDF-ENG
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