‘Our aim is to create a right environment for all’

Against other Indian stock exchanges which remain open for six to 13 hours (commodity) maximum, India International Exchange India (India INX) is an exchange that is open twenty-three-and-half hours in a day with trading done for 22 hours. India International Exchange (India INX) was established six months ago in the International Financial Services Centre, IFSC, GIFT City, Gandhinagar. V Balasubramaniam, MD & and CEO of the exchange, shares his experience of the past six months in this interaction. Excerpts:

What is the need for one more exchange when we already have many exchanges in the country?

First, all products across asset classes can be housed in one single exchange. We have equity, equity derivatives, interest derivatives, currency derivatives, commodity derivatives — all of these are available under one roof. Our exchange is a financial supermarket where you get all products at one place. Once a customer or broker gets into it, he is able to access all of this seamlessly.

What other objectives does India INX fulfil?

A lot of our home products (derivatives and others) are being traded in other centres such as Singapore and Dubai (flanking us in the east and the west) and they have taken the lead. There is a twin objective here. One is to create conditions to retain the business which has gone out, which should rightfully remain here, and try to bring it back. Second, once we create those conditions (economic and regulatory) on par with a first world international centre, it will create a positive impact and help India innovate in such matters. As an exchange, as an eco-system or market infrastructure, it creates the right environment for all to participate.

What have you done as an exchange over the past six months?

We have taken the best technology from Deutsche bourse’s T7 system. We have improved on it a bit and put in lot of good practices. We give a response time of four micro seconds. A second has one million micro seconds. We have created world-class infrastructure.

Second, in India there is a capital account restriction but the RBI has amended the FEMA and notified the IFSC as a zone or area where there are no capital account restrictions. Any money transferred here (to the GIFT city) is like a remittance abroad or transfer to a foreign location. The way the GIFT city is conceptualised is as a special economic zone (SEZ) notified by the Ministry of Commerce. A lot of exemptions are there from laws and the regulatory and tax regime are also easier. The focus is on ease of business.

How are volumes growing on the exchange?

There has been good response in the past six months.

It has gone up to an average daily volume of about $65 million with about $30 million worth of transactions on the Sensex 50 contracts alone. Regarding the participants, about 115 companies expressed interest, 100 of which have already created companies in the IFSC, got SEZ approval from the Ministry of Commerce, with about 89 companies getting permission from the Development Commissioner, about 64 have got SEBI registration and ‘no objection’ certificate to start brokerage and about 28 have got final certificate to start operations. We are seeing these numbers slowly and steadily rising. As more products come in, the demand will go up.

What is the next on the agenda for the exchange?

Apart from the derivative markets, which are risk management markets, we are also interested in expanding the ecosystem to have good capital markets. The extant SEBI regulations permit the listing of Depository Receipts (DRs) of Indian companies in international exchanges and also all kinds of debt papers issued by both foreign and Indian issuers.

We have been having detailed conversations with the regulators to actually introduce listing and trading in Masala bonds (rupee denominated) as well as traditional bonds (foreign currency denominate). As and when they finalise the policy for listing and trading, we will introduce it.

Does it mean that companies do not need to go abroad to raise money?

Yes. Today for DRs, we go to New York or London or Luxemburough. This (IFSC) is an international venue. Even for debt, people go to Singapore or London. For that also, this is an alternative. For foreign currency investors, they don’t have to remit money to India now. They invest in dollars and get the money back in dollars. The one point which we need to address is that short-term gains in the IFSC is taxed. We have requested policy-makers to look into this — because we need a level-playing field.

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