The National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE) are set to have some serious competition. Reliance [Get Quote] Money, controlled by the Anil Dhirubhai Ambani Group, and Financial Technologies India Ltd (FTIL), which operates one of the world's largest exchange networks, are exploring the option of setting up their own equity exchanges.

Sources familiar with the developments said both companies see enormous scope in this space since only five per cent of Indian households invest in equities compared to the international average of up to 50 per cent.

The scope for a new exchange can be seen from the rapidly growing business of equity derivatives, which are basically instruments whose value is at least partly derived from one or more underlying equities.

The NSE enjoys a virtual monopoly in equity derivatives with daily average volumes at Rs 10,000 crore in the spot segment. In comparison, the BSE has daily average volume of just Rs 4,000 crore. The NSE's daily average volume in derivative segment is Rs 40,000 crore.

Given NSE's virtual monopoly, sources said, there is scope for a third � or even a fourth � stock exchange.

Reliance Money is a prominent player in commodities after picking up 10 per cent in the National Multi Commodity Exchange (NMCE). The company wants to increase its holding to 26 per cent shortly.

Reliance Money's spot exchange for agriculture commodities is also expected to start trading next month. NMCE has applied to the Securities and Exchange Board of India (Sebi) to set up a currency futures exchange.

An equity exchange fits into the company's overall strategy, the sources said. When contacted, Sudeep Bandyopadhyay, chief executive officer of Reliance Money, said: "We are not looking at the equity segment right now, but given an opportunity we will certainly look at setting up an exchange for small and medium enterprises."

The FTIL group has interests in a currency futures exchange, commodity futures, power exchange and spot exchange for agricultural commodities and plans to set up an exchange for SMEs. It has set up exchanges overseas also.

When asked about its plan for launching an exchange for equity trading, a spokesperson from FTIL-promoted MCX-SX said: "We are focussing on currency derivatives. All our initiatives in this segment are driven by innovation, information, education and research. We will continue to work hard and develop this segment and do not have any comments to make on the question at this point of time."

If approved, these will be the first stock exchanges after 1994 when the NSE was set up.

Both aspirants will need Reserve Bank of India approval. For FTIL, the equity exchange would be an extension of MCX-SX, its currency trading exchange, which was launched under a subsidiary. Reliance Money will have to set up a new company.

Another issue could be equity holding. Sebi has recently decided to allow a single shareholder to hold a maximum of 15 per cent in stock exchanges, but has not notified this yet. Sources said both companies' track record will be key in getting regulatory approvals.