Nasdaq to enter Indian market
he BSE (Bombay Stock Exchange) and NSE (National Stock Exchange) could soon face international competition in their backyard.Nasdaq, one of the leading exchanges in the US, is planning to enter the Indian equity exchange space by integrating the networks of regional stock exchanges in the country.According to sources, Nasdaq has recently made presentations to five regional stock exchanges (RSEs) - Ahmedabad, Bangalore, Kochi, Chennai and Vadodara - for setting up a national level equity exchange.Nasdaq, which operates through a 'quote driven trading system', is planning to introduce the same trading system in the country by integrating RSEs.Under this system, market makers are obliged to give two-way quotes to the system.As against this, the country's premier bourses - NSE and BSE - have an order driven system that accepts bids and orders from buyers and sellers. It retains all bids and order in the order book on a price time priority basis.So, what is the fundamental difference between both systems? Markets work on a simple premise. If you intend to sell a stock, for instance, the assumption is, there will be a buyer. What happens when there are no buyers? In a stock market, if the situation persists, illiquidity can persist.To get around the problem, stock exchanges like Nasdaq employ market makers. When there are no buyers for a stock, for instance, the market makers step in and compete among themselves to buy the stock. It works the other way around too.If there are no sellers for a stock and demand is rising, market makers sell the stock from their own reserves.Market makers make a profit by maintaining a difference at which they buy and sell their stocks. This, in exchange lingo, is called buy-ask spread.

Of course, the risk of taking losses is a very real one. To get around that, these players employ fairly complex hedging options that attempts to insulate them from the attendant risks.Nasdaq's contention is that a trading platform like this, is a more compelling proposition that the one that is employed by most stock exchanges.Sources said various options are being considered for setting up the national level platform. One of the options is to set up two separate companies for providing common settlement system and technology support. Nasdaq might take a majority stake in these companies.Another option is Nasdaq may acquire some stake in regional exchanges and develop the system."As the regulatory provision does not allow any entity to pick more than 5% stake in stock exchanges in the country, the option of setting up two separate companies for common clearing and settlement and technology seems to be loking more viable," said sources at the Ahmedabad Stock Exchange.When contacted by TOI, Ghanshyam Das, MD, Asia Pacific region, Nasdaq, declined to comment.Sources said entry through RSEs is the only option left with Nasdaq as both NSE and BSE have other exchanges as investors.While NSE has sold a stake to NYSE, BSE has given equity stake to Deutsche and Singapore exchanges.