With the country’s premier stock exchanges and heightened activity in the corporate world, Mumbai is set to don the mantle of Asia’s financial hub
Ashish Rukhaiyar
Aug 4, 2009
MAHARASHTRA’S CAPITAL Mumbai is India’s financial hub and is poised to don the mantle of an international financial nerve-centre. It houses the country’s two premier stock exchanges, National Stock Exchange (NSE) and Bombay Stock Exchange (BSE), which have promoted the equity cult in India. Not to forget, a third exchange—Multi Commodity Exchange (MCX)—has already established its footprint and is all set to expand it.
The BSE is known for its strong cash market while NSE has both cash and derivatives segments. But the beauty of the whole game is that it is not limited to equity. Currency derivatives, which were launched last year in August, have given India Inc a way to hedge against currency fluctuations in a more transparent manner. MCX and NSE, incidentally, have been fighting a close battle in terms of market share in the currency futures segment.
And while it is not even a year since currency derivates marked their entry, the exchanges are all set to foray into interest rate futures or IRFs. This move may come across as the introduction of yet another financial instrument but it indeed underlines Mumbai's aspiration to become an international financial hub.
Finance experts, interestingly, feel that the strengths of the three exchanges need to be synergised if India has to usher in its next set of reforms. In fact, there are many instances of exchanges being merged domestically or crossborder globally. It has only given rise to a bigger and more efficient stock exchange.
In Indonesia, the Jakarta Stock Exchange and Surabaya Stock Exchange were merged to form a consolidated Indonesia Stock Exchange. Australia merged the Australian Stock Exchange and SFE Corporation in 2006 to form the ninth largest listed exchange in the world. Even the Korea Exchange was established in January 2005 through the merger of Korea Stock Exchange, KOSDAQ and Korea Futures Exchange.
Established in 1875, the BSE is Asia’s oldest stock exchange but is trying hard to usher in a range of innovative solutions for India Inc. Its newlyappointed MD & CEO Madhu Kannan has worked with NYSE and also with Merrill Lynch. Kannan has already started building a team of experts to prepare BSE for the next level. He recently hired Sayee Srinivisan of Chicago Mercantile Exchange to head and develop BSE’s languishing derivatives segment.
Unlike the BSE, the NSE made its entry only 14 years ago. Despite its newness, the NSE has marched ahead of BSE in volume terms and business initiatives. This has prompted industry experts to question the rationale of two separate exchanges, especially when global bourses are experiencing consolidation.
While SEBI and exchange officials remain tightlipped on merger issues, instances of exchange mergers from around the world prove how consolidation ultimately helps the financial market weed out monopoly and create efficiencies.
The market regulator in India could even look at exchanges as two separate entities for listing different instruments, like in the US. It could also do well to merge the two clearing houses—CDSL and NSDL—to streamline the depository functions.
Since brokerages now have to register with both the depositories, it gives rise to undue friction. Not long back, there were reports about how the two depositories were at crosshairs over discounts given by one of them to draw in more brokers.
Interestingly, not very long ago, there were reports that at least two exchanges have started talking to each other to reach some kind of arrangement. While a stake sale could be a distant possibility, market players say that the entities have at least started looking at sharing stock feed and technology at some level.
The deliberations for interest rate futures, say industry players, have also brought BSE and MCX to the same table. The two exchanges have been jointly interacting with a lot of industry players to come out with the best possible product.
While one can safely say that the foundation for making Mumbai the country’s financial hub has been laid well in place, what is required is the next set of reforms to make the island city a truly international financial hub.
Ashish Rukhaiyar
Aug 4, 2009
MAHARASHTRA’S CAPITAL Mumbai is India’s financial hub and is poised to don the mantle of an international financial nerve-centre. It houses the country’s two premier stock exchanges, National Stock Exchange (NSE) and Bombay Stock Exchange (BSE), which have promoted the equity cult in India. Not to forget, a third exchange—Multi Commodity Exchange (MCX)—has already established its footprint and is all set to expand it.
The BSE is known for its strong cash market while NSE has both cash and derivatives segments. But the beauty of the whole game is that it is not limited to equity. Currency derivatives, which were launched last year in August, have given India Inc a way to hedge against currency fluctuations in a more transparent manner. MCX and NSE, incidentally, have been fighting a close battle in terms of market share in the currency futures segment.
And while it is not even a year since currency derivates marked their entry, the exchanges are all set to foray into interest rate futures or IRFs. This move may come across as the introduction of yet another financial instrument but it indeed underlines Mumbai's aspiration to become an international financial hub.
Finance experts, interestingly, feel that the strengths of the three exchanges need to be synergised if India has to usher in its next set of reforms. In fact, there are many instances of exchanges being merged domestically or crossborder globally. It has only given rise to a bigger and more efficient stock exchange.
In Indonesia, the Jakarta Stock Exchange and Surabaya Stock Exchange were merged to form a consolidated Indonesia Stock Exchange. Australia merged the Australian Stock Exchange and SFE Corporation in 2006 to form the ninth largest listed exchange in the world. Even the Korea Exchange was established in January 2005 through the merger of Korea Stock Exchange, KOSDAQ and Korea Futures Exchange.
Established in 1875, the BSE is Asia’s oldest stock exchange but is trying hard to usher in a range of innovative solutions for India Inc. Its newlyappointed MD & CEO Madhu Kannan has worked with NYSE and also with Merrill Lynch. Kannan has already started building a team of experts to prepare BSE for the next level. He recently hired Sayee Srinivisan of Chicago Mercantile Exchange to head and develop BSE’s languishing derivatives segment.
Unlike the BSE, the NSE made its entry only 14 years ago. Despite its newness, the NSE has marched ahead of BSE in volume terms and business initiatives. This has prompted industry experts to question the rationale of two separate exchanges, especially when global bourses are experiencing consolidation.
While SEBI and exchange officials remain tightlipped on merger issues, instances of exchange mergers from around the world prove how consolidation ultimately helps the financial market weed out monopoly and create efficiencies.
The market regulator in India could even look at exchanges as two separate entities for listing different instruments, like in the US. It could also do well to merge the two clearing houses—CDSL and NSDL—to streamline the depository functions.
Since brokerages now have to register with both the depositories, it gives rise to undue friction. Not long back, there were reports about how the two depositories were at crosshairs over discounts given by one of them to draw in more brokers.
Interestingly, not very long ago, there were reports that at least two exchanges have started talking to each other to reach some kind of arrangement. While a stake sale could be a distant possibility, market players say that the entities have at least started looking at sharing stock feed and technology at some level.
The deliberations for interest rate futures, say industry players, have also brought BSE and MCX to the same table. The two exchanges have been jointly interacting with a lot of industry players to come out with the best possible product.
While one can safely say that the foundation for making Mumbai the country’s financial hub has been laid well in place, what is required is the next set of reforms to make the island city a truly international financial hub.
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