BSE has made several attempts to find a foothold in the derivatives segment. How confident are you this time around?
We have addressed all factors that have impeded the development of BSE’s derivatives segment. I am leaving no stone unturned — starting with the investor and the broker to the software provider and algo developers. The approach this time is very methodical. It will take a few months but we will crack this.
Why not put the building blocks in place first and then launch the product?
If you don’t launch a product, nobody is ready to entertain you. The average feedback you get is: ‘First have a product and then we will look at it’.
When you bring a product, there will be people who will ask: ‘Why have you rolled out the product? You should have worked on the back-end first’. It is a Catch-22.
Will BSE deplete NSE’s derivatives liquidity pool?
It is a symbiotic, contributory, and complementary product. It is in a different venue, has a different expiry, and different lot sizes. These will help give rise to several strategies, such as pair trading. We are not looking to eat into NSE’s market share. The overall liquidity pool will only grow.
Why not have a liquidity enhancement scheme (LES)?
If all factors are not addressed, LES will not work. There is evidence of it. In the past 11 years, LES has been tried by the BSE. It has not worked. But if all factors are considered, there is no need for LES. LES has been tried in isolation for a long time.
My thought process was to set it aside. There is no shortcut to success. You should feel strongly about what will work and then invest effort to make it work.
The retail interest has been on the wane of late. Is the peak of retail interest behind us?
Market behaviour and participation are difficult to predict. It is important to look at it from a long-term perspective. In the longer term, the number of clients will grow if you are more inclusive and draw all segments of the market from all centres.
There is this theory that every country has only one large liquidity pool. What are your thoughts on this concept of one country, one exchange?
Take Singapore, Hong Kong, Australia, South Korea, and Taiwan, for instance. Many have only one exchange. But the regulatory structure and shareholder structure are dissimilar. Corporate governance will be a very big concern if there is only one exchange.
In India, we have seen governance failure if there is a good amount of concentration. For a country of India’s size and diversity, having a single exchange is not adequate. There is also the risk of cyberattack. If all the trading is concentrated, what happens if there is a cyberattack?
Further, exchanges these days are more technology-driven than stock exchanges and prone to glitches. If you don’t have multiple exchanges, how will you have product differentiation? How will you have product interplay? How will you bring complementary products like the one we just launched?
Do you also plan to have an SGX Nifty Connect kind of product at the IFSC?
Since we didn’t have a tie-up with any global exchange where Sensex was getting traded, there was no question of having a similar product. But if you are asking if Sensex should be licensed to any exchanges outside India, these are wonderful thoughts. But since it has been only four months since I came on board, I am first concentrating on building domestic liquidity. Once I can create it, all these are very important points to look at for another day.
What are your thoughts on extending market hours?
Whatever the market wants, we are here to provide. As and when market demand crystallises, we will consider it.
The Securities and Exchange Board of India’s regulations on stock exchanges are seen as being stringent.
The purpose of regulations is to protect the interest of investors. Are our regulations doing well to protect the interests of investors? Yes. Some multiple events and situations have come up but the country has managed them quite well. I feel the regulators are on track to provide new regulations through a consultative process.
Any new segment you are actively looking to enter?
We were the first exchange to get a social stock exchange licence. We are doing well there. It is not a profit-making venture but a social contribution.
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