India may finally add a third stock exchange to Dalal Street after more than two decades.
The Metropolitan Stock Exchange (MSE) isnโt entirely new. It first started in 2008 as MCX-SX but struggled to survive in a market dominated by NSE and BSE. This was largely due to severe liquidity constraints and intense competitive pressure. For years, it remained inactive.
Now finally trading in MSE is expected to begin from 27th January.
๐ช๐ต๐ ๐๐ป๐ฑ๐ถ๐ฎ ๐ต๐ฎ๐ ๐ต๐ฎ๐ฑ ๐ผ๐ป๐น๐ ๐๐๐ผ ๐ป๐ฎ๐๐ถ๐ผ๐ป๐ฎ๐น ๐ฒ๐ ๐ฐ๐ต๐ฎ๐ป๐ด๐ฒ๐?
Starting a stock exchange in India is really hard
- โน100 crore net worth is required just to get a SEBI licence
- Another โน100 crore is needed to set up a separate clearing corporation
- An exchange must clock โน1,000 crore of annual trading volume
Failure to do so for two consecutive years and SEBI can shut you down
You also need surveillance committees, grievance redressal systems and at least 25 active brokers
๐ฆ๐ผ ๐๐ต๐ฎ๐ ๐ถ๐ ๐ ๐ฆ๐ ๐ฑ๐ผ๐ถ๐ป๐ด ๐ฑ๐ถ๐ณ๐ณ๐ฒ๐ฟ๐ฒ๐ป๐๐น๐ ๐๐ต๐ถ๐ ๐๐ถ๐บ๐ฒ?
MSE is attacking the core problem of liquidity
- Instead of waiting for volumes to build organically, it has rolled out a comprehensive Liquidity Enhancement Scheme (LES).
Hereโs how it works:
1) Around 130 highly liquid stocks (Reliance, HDFC, TCS, etc.) are identified
2) Designated market makers are appointed
3) Their job is to continuously provide buy and sell quotes even when natural demand is low.
4) The exchange subsidises liquidity by compensating these market makers and waiving transaction fees
5) Think of it as jump-starting liquidity, so early traders donโt face wide spreads or execution issues.
This scheme runs till June 30, 2026, giving MSE a window to build critical mass.
๐ช๐ต๐ ๐ถ๐ ๐ ๐ฆ๐ ๐๐ฐ๐ฎ๐น๐ถ๐ป๐ด ๐๐ฝ ๐ป๐ผ๐?
1) Timing finally works in its favour.
- MSE (then MCX-SX) accused NSE of predatory pricing in currency derivatives
- CCI ruled against NSE and imposed an โน856 crore penalty
- NSE appealed in higher courts and it has been dragging for years
- Now with NSE preparing for its IPO, settling this case would be important to preserve the IPO Valuation.
- If NSE tries to settle matter before IPO, it would give MSE a permanent financial war chest.
2. SEBIโs derivatives expiry rule change
- Only two weekly equity derivative expiries per week are allowed
- NSE had to discontinue Bank Nifty weekly options
- This opened space for alternative exchanges to offer products on non-clashing days.
3. Serious capital backing
- Since 2024, MSE has raised โน1,240 crore
- Investors include Zerodha through Rainmatter, Groww, Peak XV
- These brokers control 40% of Indiaโs retail demat accounts
๐ช๐ต๐ฎ๐ ๐ฎ๐ฟ๐ฒ ๐๐ต๐ฒ ๐ฐ๐ต๐ฎ๐น๐น๐ฒ๐ป๐ด๐ฒ๐?
- Liquidity subsidies are temporary
- NSE still controls 90โ92% of cash markets and 95% of F&O.
- Trading systems, algos and institutional infra are built around NSE
- NSE and BSE can quickly replicate successful products
- For MSE to survive, it must innovate continuously, not just compete on volume.