USEIL gets approval to begin trade in currency derivatives
The National Stock Exchange, Multi-Commodity Exchange and the Bombay Stock Exchange will soon have a new competitor in the currency derivatives segment with the newly-promoted United Stock Exchange of India (USEIL) all set to launch trading operations over the next 10 weeks.
USEIL, promoted by 11 banks, MMTC, and brokerage firm Jaypee Capital has received an in-principle approval from the market regulator, Securities and Exchange Board of India (Sebi), for commencing contracts in currency derivatives.
Top officials briefing the media said today the exact shareholding pattern is still being worked out. At present, Sebi norms do not allow one entity to hold more than 5 per cent equity. But a relaxation in this norm is granted for a short period and four entities — Bank of India, Federal Bank, MMTC and Jaypee Capital — would hold more than 5 per cent each to start with. The paid-up capital of the new exchange will be Rs 120 crore.
Bank of India Chairman and Managing Director T S Narayanaswami said, “The background of promoters places the exchange in an ideal position to build liquidity quickly and handhold smaller participants in benefiting from the exchange platforms.”
Trading in currency derivatives, which began in August 2008, has been good with daily volumes hitting the Rs 2,000-crore mark. NSE and MCX are close by in terms of market share, while BSE has fallen way behind.
National Multi Commodity Exchange is also planning to launch trading in this segment. Officials of USEIL said a plethora of exchanges would result in competition but it would also help volumes grow. “The market has outgrown our projection. We were expecting daily turnover of Rs 1,000 crore by March 2009. But it is already Rs 2,000 crore,” he said.
However, despite the rising volumes on the exchanges, bulk of trading in currency derivatives still take place Over The Counter through bilateral deals.
One of the biggest player in the derivatives market is Jaypee Capital, its Managing Director Gaurav Arora said that USEIL is targeting for a market share of 40 per cent. He said the new volumes will not be at the cost of OTC market but through new business.