If you trade in India’s stock market, most of your transactions occur on the National Stock Exchange (NSE) or Bombay Stock Exchange (BSE). Since these stock exchanges are the most recognised, reliable, and efficient, they are most likely to facilitate the trades in the market.
Therefore, it brings up two important questions:
- Do we really need the MSEI stock exchange as a third exchange?
- And, realistically, would investors shift their trades there?
The majority of people who trade in the stock market want to know answers to these questions more than any guessing proposition. When investors in the market ask if India needs a third stock exchange, they are not doing so, based on the trading prospect. They are trying to determine where in the Indian stock market MSEI actually fits, and whether its presence is truly that important. The deeper they go into this question, the more they find contracting answers.
In this article, we will solve this dilemma for the investors.
About MSEI: Vision on Paper vs Reality in the Market
The Metropolitan Stock Exchange of India (MSEI) markets itself as a modern technology-based marketplace centred on transparency, financial inclusion, and broad-based participation.
It deals in the following segments:
- equities
- currency and interest-rate derivatives
- futures and options
- debt and SME securities
On paper, MSEI has the features of a modern marketplace, built on principles of equity and innovation. However, one obvious question still remains: If everything is in place, why is consistent liquidity not followed?
To get the answer to this question, let us first know the criteria that generally define the performance of an exchange.
These criteria are:
- Trust
- trading volume
- breadth of the market
- reliability of execution
On these standards, MSEI is still considerably behind the market leaders in India. Facilities may be in place, but when it comes to activity, it is still a long way from closing the existing gap.
Why Was MSEI Introduced and Where Did It Lose Ground?
There was a time when launching a third stock exchange in India was rational. They needed to monitor and control the reliance on two primary exchanges, and structural competition needed to be framed while broadening access to capital markets. However, technology alone does not define the growth of an exchange. It is the confidence and continuous participation that make an exchange successful. This was something MSEI was unable to achieve.
- The issues raised were:
- Low market volumes
- Weak brand awareness
- Failure to product differentiate
- Lack of incentives for traders and brokers
In financial markets, hesitation plays an important role. Investors always stick to the place where liquidity already exists, and this is the reason that MSEI operates more on the margins than at the centre.
Despite Raising ₹1,240 Crore, MSEI’s Progress Remains Limited
MSEI’s liquidity issue is only part of the problem, the more concerning issue is the amount of money they raised and the lack of progress made. MSEI, in less than a year, raised ₹1,240 Crore in two funding rounds. Stock Exchange raised 240 Crore in 2024, and in 2025, they raised 1,000 Crore. The funds were to be used for technological upgrades, strengthening of infrastructure, compliance systems, and a broader range of products in order to directly compete against the NSE and BSE.
However, so far, no real changes have occurred with respect to trading, liquidity, or revenue generation. There is insufficient market engagement and a lack of measurable progress with respect to operations. As a result, many market analysts and investors are asking themselves whether the funds that have been added to the system have been translated into sufficient market value or whether they have only been used to cover existing operational costs.
If MSEI has already raised such an amount, where is the progress?
The only answer to this question is that the exchange is still suffering from limited visibility, and insufficient trading volume. This is a complication that does not justify the time spent in bringing about what should have been a simple update to the system.
Depth vs. More Platforms: What Actually Helps Investors?
India already has a highly optimised trading ecosystem.
Within the NSE and BSE, investors can achieve:
- Fast order matching
- Stable clearing systems
- Strong surveillance
- Deep participation across segments
As of now, there is no reason to add a new exchange without sufficient value. Otherwise, it will dilute liquidity rather than strengthen the market.
The issues caused by fragmented markets, when trading scatters across different venues:
- Thin order books
- Weakened price discovery
- Increased spreads
- Less predictable execution
What investors are looking for is confidence, and that is something which is majorly missing from the Metropolitan Exchange of India (MSEI).
Who Truly Needs the Metropolitan Stock Exchange of India?
Institutional Perspective
Investing institutions need consistency in pricing and dependable execution, with high trading liquidity. Businesses receive these benefits from the National Stock Exchange and the Bombay Stock Exchange. The Metropolitan Stock Exchange of India lacks any strategic differentiation, which means institutions will not prioritise trading with MSEI.
Retail Perspective
Typically, retail investors will settle with trading platforms that have proven established trading networks. This leads to the following question:
Would you rather place orders on an exchange with proven trading activity or an exchange with dubious reliability and liquidity?Investors will, of course, choose more established and active trading exchanges and MSEI does not hold this ability to attract retail investors.
Can India Rely on MSEI for F&O Trading?
Liquidity is always needed for more effective trading, which makes F&O trading on MSEI a key conversation topic.
Why does F & O need deep participation?
More active trading on F&O means:
- Lower bid-ask differences
- Fast and reliable order execution
- Better controlled or managed risks
- More trading price discovery
NSE usually dominates this place because of the scale of trading instead of relying only on technology.
Why Fragmenting F&O Creates More Risk
When derivatives liquidity is distributed among multiple trading platforms, it will bring:
- Inconsistent pricing
- Execution delays
- Increased trading risks
In such situations, more stock exchanges do not improve accessibility; they simply complicate the trading ecosystem. Most investors will always choose the more proven and reliable option.
What Can We Learn From MSEI Numbers?
Numbers tell us more than what is presented through strategies.
FInancial Ratios
Financial Ratios FY24 FY23
Operating Margin -222% -26%
Net Profit Margin -231% -34%
Return on Equity -25% -8%
Debt-Equity 0 0.01
Current Ratio 4.33 5.68
These numbers generally signify more of the pressures than sustainable growth.
Profit and Loss Statements
P&L Statements 2025 2024 2023
Revenue 4.3 7 9
EBITDA -41.7 -54 -49
PBT -35 -48 -20
PAT -34 -49 -18.7
EPS -0.06 -0.1 -0.04
Revenue decline and continuing losses do not inspire confidence, particularly for an exchange expected to support growing trust.
MSEI vs NSE vs BSE: Does Real Competition Exist?
This comparison tells the story:
- NSE: dominant F&O, tech, high volumes
- BSE: old tech, growing innovation, trusted indices
- MSEI: low volumes, increasing relevance, developing identity
For competition to work, all players must have comparable weights. That’s not the case here.
Does India Need a Third Stock Exchange?
That brings us to the fundamental question: What makes MSEI different from other existing exchanges? So far, no one has been able to tell.
It is evident that India derives more value from:
- better investor education
- improved market transparency
- more stringent risk frameworks
As opposed to simply providing another stock exchange. If MSEI does not carve out a purpose and value proposition, its relevance will continue to be questioned.
Final Words: Should India Place Reliance on MSEI?
India needs exchanges that are deep, reliable, transparent, and provide long-term stability. Currently, the MSEI stock exchange does not convincingly meet that threshold. The continued financial difficulties of the stock exchange and lack of participation make it difficult to consider MSEI a primary option. It is too early to depend on MSEI, especially considering that the NSE and BSE provide a robust ecosystem for Indian investors, until MSEI provides more liquidity and consistent advancements.
FAQ’s
Q1-What does MSEI mean in the stock market?
Q2-Why does MSEI not have a strong market share?
Q3-Does India require 3rd stock exchanges?
Q4-Is MSEI good for investors?
Q5-How does MSEI stack up to NSE and BSE?
Q6-How effective is trading on MSEI F&O?
Q7-Will MSEI improve in the future?
Q8-Should retail investors consider trading on MSEI?
Q9-Why do investors hesitate to use MSEI?
Q10-What is more important: more exchanges or better markets?
Disclaimer
This article is for informational purposes only and should not be considered investment advice. Prices and data of unlisted shares are based on publicly available sources and may vary. Investors are advised to conduct independent research or consult financial professionals before making investment decisions.
