BSE versus NSE. Which one is better for retail traders? As you know, BSE and NSE are two biggest stock exchanges in India. There are two dozen more exchanges, but they’re insignificant in terms of size.
First, let’s get some facts about these exchanges. BSE was established back in 1875 pretty old. NSE is a relatively new exchange. BSE is Asia’s oldest stock exchange, and in case you’re wondering, which is the world’s oldest, that would be Amsterdam Stock Exchange. NSE is the new kid on the block, relatively speaking, of course. BSE has over 5,000 listed companies and NSE has about 2000.
BSE is a publicly listed company, whereas NSE is still a privately held company. It’s important to remember that in spite of these differences, both operate under SEBI’s guidelines. Ever since NSE was established, there has been a fierce battle between the two to attract more trading volume.
After all, more trading on the exchange will mean more money for that exchange.
Let’s see who is winning the battle for attracting traders like you and me.
NSE has higher liquidity
If you are a trader, liquidity should be your top criterion for picking a stock exchange.
Let’s say you plan to go to a New year party and have to decide between two places: one where there are hundreds of other party animals and the other where there is an only handful. Where would you go?More people equals a harder party. Right?
Similar dynamics play out in trading; you need to go to the exchange where the majority of traders are hanging out. higher liquid liquidity means tighter spreads, lower slippages, and ease of entry and exits in the trades Liquidity, especially important for entry day and swing traders.
However, if you are an investor, liquidity doesn’t matter and hence other factors (mentioned below) will come into play.
NSE is the King of Futures & Options
There is no question about it: NSE is the best stock exchange when it comes to derivatives trading. That means anyone intending to trade in futures and options (for trading or hedging) should be trading on NSE.
The derivative trading volumes on BSE are abysmal and insignificant. BSE blew the golden opportunity to be a dominant player in the derivatives segment and now it’s too late. 90% of trading in derivatives happen on NSE. NSE has won the battle fair and square.
It costs (almost) the same to trade on BSE and NSE
The exchange transaction charges are almost the same for BSE and NSE. In absolute terms, they may look a little different but relative to other big charges (STT and brokerage), these are insignificant. I don’t recommend selecting an exchange just based on these charges.
BSE has more listed stocks
BSE has the (dubious) distinction of having more than 5000 stocks while NSE has less than half. One of the primary reasons for this discrepancy is that the listing norms on NSE are more stringent than those on BSE. In other words, NSE is more selective in picking which companies can list on them, whereas BSE even allows sub-standard companies to get in.
From a trader’s point of view, I don’t think it makes any difference because all the tradable stocks are listed on both exchanges. However, investors looking out for the hidden gems in the small-cap or micro-cap universe will find BSE to be more fertile ground. There are also some quality stocks such as Spice Jet that are only listed on BSE.
Everything else doesn’t matter
You can keep digging into other factors but I can tell you from experience that everything else doesn’t matter. So, stop wasting your time doing so and decide based on the considerations stated above.
NSE clearly wins this battle because it has better liquidity in the cash market. It is better for retail traders, especially day traders, and because it is the only viable option when it comes to derivative trading.If your futures and option trader trade on NSE. If you are a savvy investor, go look for stocks on both exchanges.
