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Indian bourses: landscape is changing

SEBI initiatives set to boost trading


SEBI initiatives set to boost trading

The landscape is changing with Indian authorities tailoring regulations, making it easier for exchanges trading corporate shares, bonds, equity, derivatives and other financial tools in India.

The Security and Exchange Board of India (SEBI) is allowing inter-operability between the domestic exchanges with settlement under one clearing house before 1 June 2019.

With one clearing house, traders will have flexible choices of buying the best price stock from any of the eight exchanges in the country.

SEBI has also released detailed operational guidelines for alternative investment funds such as hedge funds, angle funds and venture capitals, allowing them to set up operations and enjoy tax free status in the Gujarat International Finance Tec-City (GIFT City).

With this latest move, SEBI is creating an eco-system within the GIFT for international funds, which is widely welcome by investors.

“Some of these are overdue policy initiatives,” said an industry observer at the Futures Industry Association (FIA) annual conference held in Singapore 27-30 Nov 2018.

The India International Exchange (INX) is expected to benefit as its customer-funds based outside the country will start considering offices in the GIFT City.

Exchanges based outside India are also keen on developing and further extending trading network in India, expecting more flexibility from Indian regulators.

One such bourse is Dubai Gold & Commodity Exchange (DGCX), two-third of its business is backed by the Indian trading community. It is studying the potential of participating in the Nifty 50 contract.

“The Nifty 50 index remains of high interest for us,” said DGCX chief executive officer Les Male at FIA Asia 2018, the Asian derivatives conference in Singapore 27-30 Nov 2018.

Currently, the SEBI is going through a Nifty 50 index dispute between National Stock Exchange (NSE) and Singapore Exchange (SGX).

After the SEBI outcome, DGCX wants to see the potential of playing a role in the Nifty 50 in the future, given strong backing of its over 200 members in India.

“Two-third of our business comes from India. We are keen to see if we can spring board into something,” Male said after addressing a Wednesday panel at the conference, Nifty 50 being one reference.

Among its Indian origin products, DGCX has launched 54 single stock futures since last year. More such listings are expected.

“The Indian products that we support are key to the DGCX. We look forward to that relationship,” he said.

“I am very respectful of the strength that the Indian market provide to us, but now we got to use it as a platform to attract GCC/Middle Eastern Financial Institutions,” he stressed.

Going forward, Male is looking to diversifying the product range with trade expanding across the oil-rich economies of the Gulf Cooperation Council (GCC).

For next phase, DGCX would use the strength of its Indian members to spring board into the GCC and Asian markets.

DGCX’s product range includes India Gold Quanto Futures, Indian Rupee Quanto Futures, INR-USD Futures, Dubai Indian Crude Oil Futures, Indian Rupee Options and two different MSCI India Futures Contracts.

Multi Commodity Exchange of India Ltd (MCX) is extra-bullish on exchange trading in India with multi-fold opportunities as it works on potential of launching energy and ferrous metal contracts in the first half of next year.

“We remain completely bullish on the market prospects,” MCX managing director and CEO Mrugank M. Paranjape said on the sidelines of the FIA Asia 2018.

“We are expecting, in the next three to six months, Indian regulations that will also allow spot commodity exchanges and as and when that is allowed, we will get into that business,” he said.

Elaborating, Paranjape pointed out that only 30 commodities out of the of 91 are being traded in India while financial institutions such as mutual funds, banks and insurance companies are still not allowed to trade.

As of now, spot commodity trading in India is low at 0.5 times ratio to the GDP compared to the global markets, which is 6.5 times in the United Kingdom and 2.5 times in the United States, he pointed out.

MCX expects 15% CAGR over the next couple of years.

MCX volume averages Rs.25,000 crore on single sided counting or just taking the volume from one side buyers or sellers.

The exchange has recently launched option products.

It has expanded the delivery locations of Gold and Gold Mini contracts, adding Chennai, Hyderabad, Kochi, Bengaluru and Kolkata to Ahmedabad, Mumbai and New Delhi.

MCX Crude Oil Option registered an average daily turnover and volume of Rs.207 crore and 473,900 barrels, respectively, as of 26 November 2018, in comparison to respective figures of Rs.117 crore and 2,40,600 barrels in May ’18, the month it was launched. That is the type of high growth, according to observers.

India’s market leader, Bombay Stock Exchange (BSE) underlined the strength of the country’s stock market.

BSE latest contracts are Gold, Silver and Oman Crude and is widely expected to add agriculture products, an industry observer said.

The GIFT City-based India International Exchange (INX), a subsidiary of BSE, is also expanding fast.

“Going forward, we want to list depository receipts,” said INX managing director and CEO V. Balasubramaniam.

Summing up the market strength, he highlighted the INX success of bond listings, especially the rupee-denominated Masala bonds of Indian companies.

He said: “We have crossed US$40 billion of the listings in nine months of the first bond listing.”

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