The year 2007 will bring in seven developments that can change the domestic capital market. The capital market is all set to look very different from what it is today.

Transparent bonds market

One of the very important developments will be the launch of corporate bonds market on the Bombay Stock Exchange platform.

From January 1, according to the Securities and Exchange Board of India, all entities transacting in debt securities issued by banks, public sector undertakings, municipal corporations, corporate bodies and companies will be required to report the trades on the BSE platform.

"For the first time the world over, such a platform is being created for developing corporate bonds market," said Rajnikant Patel, MD, BSE. The Sebi has selected the BSE for this and it is a challenge for the stock exchange to see that corporate bonds market develops on its platform.

Initially, the transactions will only be reported on the platform. But, in future, the platform is set to facilitate the transactions. If and when that happens, it will provide transparency to the corporate bonds market.

BSE rising

Till date, it has been a general complaint that the National Stock Exchange is favoured by the finance ministry and the regulator.

With the BSE vested with the responsibility of the corporate bonds market, it appears that the imbalance is getting corrected, as the balance tilts towards the BSE.

If the BSE succeeds, in future it can get more opportunities, which will prove that the regulator is not biased against it. Besides, there are the benefits of demutulisation.

At present, the NSE is the market leader in turnover and, taking derivatives into account, it notches up nearly 90 per cent of the market share. Despite this, the BSE Sensex is more popular and widely quoted.

Maybe for the first time, the NSE is waking up to ensure that the Nifty as a brand should also be highly valued. The NSE has started a campaign to make the Nifty popular. The BSE is also planning to leverage brand Sensex in 2007. The Sensex-based products traded on the exchanges in the US or elsewhere in the world may become possible in 2007.

SAFE index

The year 2007 will see the emergence of the South Asian Federation of Exchanges index. It is a composite index of the stock exchanges of South Asia. A meeting of SAFE that took place in November-end in Colombo decided to launch an index comprising select companies or indices of the South Asian stock exchanges. India, Pakistan, Bangladesh, Bhutan, Nepal, Sri Lanka and Mauritius, among others, are the members of SAFE.

The structure of the index is being worked out. It can work as a barometer of the capital market in South Asia, as the world turns its attention to the region," said a source, who attended the meeting. This is a certainty in 2007. With the launch of the index, the world will get signals of the happenings in the South Asian stock markets. Eventually, the plan is to launch products such as exchange traded funds based on the SAFE index to be traded on the member exchanges independently. Derivatives can also be started in the index.

Unified SRO

The Sebi had issued norms to form a self-regulatory organisation for the capital market long ago. Now, the Sebi wants a unified SRO for all intermediaries, including mutual funds and brokers. There are different views over this.

But, the Sebi would like to ensure that the new SRO sees the light of day in 2007. With this, market regulations will be easy and effective, as the SRO will have powers and will be a front-end regulator. A more disciplined market will be an interesting thing to watch out for in 2007.

Certified bourses

We have seen companies and even trade associations, such as the Indian Merchants' Chamber, getting quality certifications such as ISO 9000. Asia's oldest stock exchange, the BSE, already has an ISO 9000 for its surveillance department and it is planning to get the certificate for the whole organisation. It will be interesting to watch what kind of qualitative changes take place in the working and operations of the BSE.

BSE public issue

The most important of all will be the IPO of the BSE and the participation of foreign stock exchanges in it. If everything goes well, the entry of foreign stock exchanges will bring in international market practices.

According to reliable reports, foreign equity participation is expected in depositories too, as the BSE may dilute its holding in the Central Depository Services Ltd.

These developments will further consolidate the industry and, in 2007, regional stock exchanges will have become subsidiaries of either the NSE or the BSE or will have closed down. Six exchanges have submitted proposals to the NSE to become its subsidiary.

Protecting investors

The Sebi is getting more powers to protect the interests of investors. A Bill proposing to amend the Sebi Act is likely to be introduced in the Parliament in the Budget session, whereby the money collected by way of penalty will be deposited in an investors' protection fund.