NSE eyeing JVs abroad, product tie-ups

The bourse, however, says it's averse to making acquisitions in the exchange business

National Stock Exchange (NSE) will focus on joint ventures abroad and product tie-ups to expand its business to other markets, said Ravi Narain, the bourse’s non-executive vice-chairman.

Narain, who handed over the NSE’s charge to Chitra Ramkrishna on April 1 after being the managing director and chief executive officer for 12 years, said it might actively look at such alliances but was averse to making acquisitions in this business.

“The sustainable strategy internationally has to be product alliance, because then, one party is not getting threatened by another. Today, one emerging market cannot march into another and say I am taking over you,” said Narain, 58, in an exclusive chat with Business Standard. “From very early days, I have not been bullish on these M&A (merger and acquisition) type of activities in exchanges globally. I always felt culturally to bring two exchanges closer is not a modest exercise.”

In the recent past, NSE had tied up with various global bourses to offer Nifty products through which investors in those countries can bet on one of India’s benchmark indexes. Most recently, the exchange said it would launch Nifty futures on the Osaka Stock Exchange, an arm of the Tokyo Stock Exchange, by March 2014. The contracts will be yen-denominated, helping Japanese investors take bets on Indian stocks without currency risks.

The listing on the Tokyo Stock Exchange would mark NSE’s third global venture. The Indian bourse already offers Nifty futures trading at the Chicago Mercantile Exchange and both Nifty futures and options on the Singapore Exchange. The Singapore bourse launched Nifty futures in September 2000, a few months after NSE began that product.

An NSE release said two Nifty-based exchange-traded funds (ETFs) were already trading on the Tokyo Stock Exchange.

Narain said the NSE was open to entering into partnerships in Africa. “There is no deliberate strategy to restrict oneself to emerging markets. But there will be some natural advantage to look at that direction more so because the developed economies are not doing particularly well at the moment.”

NSE will look at partnerships outside the core exchange business, which involves matching orders, he added. “Very often, it’s more interesting than the trading order matching system, which has rapidly become a commodity globally. So, it’s the clearing settlement, risk-management, index business, database, ETF products for a retail market. There are a lot of interesting initiatives available offshore,” Narain said.