The Hindu Business Line : Hybrid model needed for debt market: CCIL chief

THE Chairman of Clearing Corporation of India Ltd (CCIL), Dr R. H. Patil, has favoured a free competitive hybrid model for the debt market and Government securities, since no single overseas model fits well in the Indian context.

"This hybrid model is necessary, as we need to factor in the system in which these facilitating institutions such as the RBI and NSE function smoothly," he said. Referring to Google, Dr Patil said, "Just as it revolutionised information access, we could change the way securities are transacted with innovation."

Dr Patil was speaking to senior finance professionals and representatives drawn from the trading community at the International Conference on Business and Finance, 2004, organised by the ICFAI University here on Monday. He said that the Indian stock market was in many ways a trendsetter when compared with the New York Stock Exchange (NYSE) or the Nasdaq.

"What is practised in the National Stock Exchange is something unparalleled, recording practically every trade that takes place, including the time of the transactions. This is still not the case with the NYSE," he said.

Referring to the Over the Counter Exchange of India (OCTEI), Dr Patil said that it would be harsh to define the exchange as stillborn. The concept of market making may be good, but it did not work out in the Indian context, as this was developed based on the model followed by Nasdaq.

In fact, the OCTEI actually offers an ideal platform for venture capital funds and could possibly serve as a facilitator for them. With Indian companies attracting significant venture funding, this could be an ideal option.

India is amongst the most underdeveloped in terms of the debt market, which is dominated by the Central and State Government and public utilities. Corporate debt is almost stagnant and negligible and lacks transparency. We need to address this issue and make it globally competitive, Dr Patil explained.

While it is appropriate not to predict stock market trends, Dr Patil quoting George Soros, said "One should not forget market has `reflexivity,' something like herd mentality," which only means that there is no specific pattern that ensures success in the market place.