I’ll start by outright accepting the fact that this essay’s title is a clickbait. While the base statement on its own is completely true, the inference is false. I didn’t single-handedly grow BSE’s market share, I was merely a catalyst in the process but now that I have your attention, I wish to take you through a story of bottom-up transformation fueled by trust in an intern in a massive, legacy organisation - The Bombay Stock Exchange, the oldest stock exchange in Asia.

Why should you trust an intern?

In my 2nd year of Engineering, I interned in the business development team of Bombay Stock Exchange in its Kolkata office. It sounds very exciting to intern directly at the heart of India’s financial system - the star attraction of Dalal Street - and I was equally excited at the prospect of being the force that drives how India Inc operates. But, on the very first day I realised that the job wasn’t what I thought it to be. I was posted in the business development team of Eastern India. This was essentially a team that managed sales and marketing for the various products that BSE offers across Eastern India. I was asked to be the analyst for the team, my job was to figure out ways to improve efficiencies and extract whatever value I could from structured and unstructured data that they had.

This was as vague of a problem statement as possible. I had no metric to optimise, no objective to meet, no deliverables to deliver. My job was simply to help improve Eastern India’s BSE office. I started off my internship completely hassled. I was not sure where to begin. What novel thought could a 19-year-old bring to the table with people more than double my age in an industry I knew nothing about. But, with the emotional turmoil of a potential failed internship at hand, I sat quietly and let my seniors around me explain what it is that they do.

My first task was to help improve the sales for BSE’s Mutual Fund product - BSE Star MF. This is essentially the “exchange” equivalent of the normal stock market. You place your orders through this exchange and then BSE does everything to allot you the relevant MF units. Zerodha Coin also uses BSE Star MF under the hood to process your orders. At the national level, BSE Star MF was the market leader but there were significant competitors in the space and thus a strong Enterprise sales force was essential to maintain and increase market dominance. I was tasked with figuring out ways to do this by leveraging data.

The 3rd day of my internship started with a whole day of googling, understanding various sources of data available on the internet in the form of disclosure and public-view government databases, while the 4th day focused on understanding the different forms of data available within the organisation. With that under my tool belt, I realised that the best place to start off was with customers who seem to not be using the product as much anymore. This led to some fundamental exploratory data analysis and I had an actionable, beautifully created excel sheet that laid down exactly which clients to call and in which order. This and a couple of more such initiatives in the first 2 weeks led to the Eastern India office capturing about Rs 300 Crores in AUM.

This became the grounds for the trust that my manager and my team had in me. To further investigate the data and come up with even better insights for the team to act on, I asked my manager (the head of all of Eastern India) to get me python. I could come with more powerful mechanisms to improve the team in the Eastern India office through code and my manager now trusted me for it.

Given that we were in a highly regulated and security-concerned environment, it was difficult to get anything to happen, even getting something as simple as python installed on the computer required multiple levels of approval. But, to my surprise, my manager literally fought with the CTO of BSE to fast track the process. His trust in me empowered me to prove myself even more and produce even better results for the team. After a week of back and forth, and a couple of engineer visits to the office, I had python up and running on my computer.

Living at the cutting-edge of things

A lot of the fundamentals of high-calibre management that I picked up were from my manager at BSE. He empowered his team to not just limit themselves to the work they were supposed to be doing but to work towards creating meaningful change in the company or even the industry if possible.

While there were multiple other projects that I worked on at BSE, I also worked on creating a whitepaper on why SEBI should enforce cross-exchange trading in the Indian markets. Essentially this would mean that NSE, BSE and the other smaller exchanges would allow orders to be processed between each other, thus eating into NSE’s share and increasing BSE’s share. While the whitepaper never saw the light of day, the fact that I got the opportunity to ideate and look at potentially industry altering advancements was in itself gratification enough.

These and various other incredibly interesting projects helped cement my team’s trust in me and eventually the entire began coming up with use cases where data and code could help grow the company’s revenue.

Tick size and market share

It was through this high that my manager shared an interesting hypothesis - BSE’s market share seemed to be higher for stocks worth Rs 1-15 but then there was a very sharp drop. He hypothesized that it was due to an unique feature in BSE, where BSE allowed for a 1 paisa tick size in stocks worth Rs 1-15 post which it increased to 5 paise. NSE had an uniform 5 paise tick size across the board.

Tick size is essentially the denomination in which stock prices change. So, a 5 paise tick size would mean that a Rs 5.95 stock could only become Rs 6.00 or Rs 5.90. Similarly, for a 1 paisa tick size, the change would be Rs 5.96 and Rs 5.94. My manager hypothesized that in stocks priced lower, the lower tick size offered greater alpha generating opportunity for scalpers and traders who flood the market.

This hypothesis made logical sense but he did not have quantitative data on a per-stock basis to prove it. This is where I came in. I converted the hypothesis into a quantitative problem statement and developed a model to prove it. Here’s a diagram of the model:

I created a model to analyse the market share of BSE and NSE for each of the 1500 or so stocks that are common in both exchanges and as my manager guessed there was a sharp dip post the Rs 15 mark due to the lower tick sizes.

This insight was presented to the C-suite and within a year I saw the following news:

And as expected this elicited a major response from NSE in the following year:

Conclusion

My experience at BSE taught me many lessons but the greatest of them was in people management. As a 19-year old intern at an 150-year old organisation, I was able to bring about an industry altering change because my skills were recognised for what they were and my manager trusted me to deliver more than I thought I could.

At my last check-up towards the end of 2023, BSE’s market share was up by almost 10 percentage points in the Rs 1-100 stock segment which must have prompted its ardent competitor to make this change across a larger range of stocks. Although the difference in liquidity is felt a lot less for stocks priced at a higher price, this move still underscored the importance of my contribution at BSE.