The BSE is likely to buy out S&P Dow Jones Indices’ entire 50 per cent stake in joint venture (JV) Asia Index (AIPL), an index provider.
The move follows a long dispute between the two bourses over the JV, which is responsible for compiling and maintaining the popular Sensex and Bankex indices.
The deal will result in BSE having a similar structure like bigger rival NSE, where it fully owns its index-providing arms.
The move also comes at a time when both market regulator Securities and Exchange Board of India (Sebi) and banking regulator Reserve Bank of India (RBI) plan to regulate index providers amid their growing significance.
BSE and S&P had set up the JV after the expiry of the licensing arrangement with NSE and S&P-owned CRISIL.
In 2018, BSE had planned to terminate the contract. However, in 2020, Singapore International Arbitration Centre (SIAC) had declared that termination of the agreement with S&P Dow Jones Indices with respect to the JV was invalid. BSE’s termination of the JV was declared invalid. Now, the two have reached an amiable exit, said sources.
The Sensex is one of the most widely-tracked indices to gauge the performance of the Indian markets. Derivatives contracts based on the Sensex have also gained popularity over the past few months.
The index is also used as a benchmark by several exchange-traded funds and index funds.
Data on Value Research shows that nearly two dozen passive funds are benchmarked to the Sensex with assets under management (AUM) of Rs 1.62 trillion.
Besides paying S&P, industry players said BSE will also need to hire people. It has to invest in order to compete with NSE Indices, whose Nifty indices are highly popular.
Nifty indices are tracked by assets worth nearly Rs 6 trillion and command nearly three-fourths of the AUM market share in the passive category.
Further, the JV also manages other indices like those on healthcare, housing, and finance.