BSE, United SE in talks for strategic alliance

More Indian bourses are talking to each other to survive a long, fierce battle for business that's beginning to unfold in the local financial markets. The country's oldest exchange, Bombay Stock Exchange, has had preliminary discussions with United Stock Exchange of India, the youngest of the bourse, for a strategic alliance. A possible deal, that may take some time to consummate, could include equity participation, product sharing, marketing and distribution tie-ups and a common clearing house. Senior officials of the two exchanges had first explored the idea a few months ago and had met more recently to discuss the possibility. But there's a string of tricky issues that have to be sorted out before the exchanges can move ahead with the deal. For instance, BSE, as a strategic player, would like to hold more than 5% in the new exchange. According to exchange officials, while United SE is now open to offering a higher stake to BSE, formal negotiations are yet to take place on the finer points. "No final decision has been taken on the proposal," Jagdish Capoor, chairman of BSE, told ET. United SE received SEBI approval to launch trading in rupee-dollar futures. A strategic alliance with BSE would help United SE market and distribute its products through BSE's existing member brokerages, while BSE's clearing house, set up with Bank of India, which is also a stakeholder in United SE, can be used to manage the margin requirements of currency derivatives brokers on a real-time basis. However, the two exchanges must arrive at a common risk management approach, technology platform and a management policy before a deal is signed.