'MCX-SX plans to be the first universal exchange by design'

Q&A: Joseph Massey, Managing Director & CEO, MCX-SX

After making a successful entry into the currency futures segment, Financial Technologies Group-promoted stock exchange MCX-SX is now planning to replicate its success in all other areas of operation as well. In an interview with Rajesh Bhayani and Joydeep Ghosh, the bourse’s Managing Director and Chief Executive Officer (MD & CEO) Joseph Massey talks about how another exchange in the market will not confuse, but create opportunities for the investor.

MCX-SX provides a trading platform only for currency futures and is yet to enter equities, where there are already two players. How will your exchange be different?
We will introduce new products and expand our base beyond big cities. Our experience in commodity futures will be useful. We have plans to take equity investment to the taluka level. We want to be present in all the segments where a stock exchange can be. This means, apart from currency, we want to be in cash and derivatives, interest rate futures, corporate debt and small and medium enterprise (SME) segments. Our model will be like ICICI Bank. MCX-SX, too, plans to be the first universal exchange by design.

Can you explain universal exchange?
We want to enter places where there is no market for financial services. We can replicate the success of telecom and automobile industries. Besides raising funds, distribution and trading, a lot of other things are possible through the stock exchange infrastructure. For instance, initial public offers (IPOs), mutual fund products, wholesale market and fixed income securities – everything can be distributed and traded through the network and infrastructure of a stock exchange.

Given that the government is focussing on financial inclusion, there will be a lot of opportunities available. Also, there is a consensus that India should become a financial hub. In fact, global integration would be possible through financial services. And, an exchange would be the ideal medium to achieve this goal. Remember, London and Singapore are not big manufacturers or consumers, but big facilitators. They have the power of a vibrant financial service sector.

Even the other two exchanges, NSE and BSE, can also become universal exchanges?
For us, it is in our DNA. For them, it is addition of a layer. Our fundamental architecture will have all these factors from day one. The group has global footprints. Still, let me clarify, it is not ‘us’ versus ‘them’. To make India a financial hub, all exchanges will have to come together. Though there have been talks of financial inclusion, only 4 per cent of investors are from the retail segment. And, in spite of mutual funds’ existence for over a decade now, they have not been able to penetrate semi-urban and rural areas yet.

You have started divestment. How is the progress?
We have announced the sale of 18 per cent stake in the first round and have plans for further divestment. We are in talks with some overseas exchanges as strategic partners. The exchange’s board has former Finance Secretary Ashok Jha and Dr S A Dave, who have the experience of heading Sebi and UTI. Few banks have picked up equity stakes. Fundamentally, our parent company's equity base is institutionalised with a third of equity with banks and a similar holding with overseas institutional investors, including the New York Stock Exchange (NYSE).

What is the status of MCX commodity exchange’s IPO?
We will have to apply afresh as the last approval has expired. But we want to be ready because the market is looking good. The IPO should come in the current fiscal.