MSEI to partner Moody's for new indices

The exchange introduced contracts in interest rate futures, started trading in sovereign gold bonds

The Metropolitan Stock Exchange of India (MSEI), formerly MCX Stock Exchange (MCX-SX), is in advanced talks for a tie-up with global rating agency Moody’s to develop indices for itself. 

The bourse currently has two indices, SX40 and SXBank. For a start, Moody’s is expected to develop three indices for the exchange, on which its derivatives contracts will be based. 

Leading exchange BSE has a similar tie-up with S&P Dow Jones indices, while the National Stock Exchange of India (NSE) earlier had a joint venture with CRISIL for its indices. 

MSEI also plans to soon introduce two new currency products. One will be aimed at helping banks hedge their portfolio against currency fluctuations in the available-for-sale category. This is a debt security purchased with the intent of selling before it reaches maturity or selling prior to a lengthy time period in the event the security does not have a maturity.

“We are not interested in creating me-too products but in catering to specific needs of the market,” said Abhijit Chakraborty, chief operating officer, MSEI.

In terms of daily average turnover, the exchange had a market share of 3.5 per cent in the currency derivatives segment for the financial year ended March, down from 4.2 per cent the previous year.

The exchange recently introduced contracts in interest rate futures and started trading in sovereign gold bonds.

The exchange is also trying to persuade brokers to stay its member.

“In the past four months, nearly 80 brokers’ memberships have come for surrender. We have persuaded 50 per cent of them not to go ahead with the same, considering the new products being launched by the exchange in the coming months,” said Chakraborty.

For the nine months ended December 2016, MSEI posted a net loss of Rs 24 crore, compared to Rs 38 crore in the same period a year before. 

The exchange has negligible volumes in the cash and derivatives segment. “There is hardly any liquidity at the exchange in any of the segments. The need of the hour is to develop a diversified portfolio of innovative products,” said a person familiar with the business.