Nikita Vashisht
Moneycontrol News
Country’s largest stock exchange, National Stock Exchange (NSE) of India celebrated its 25th anniversary on Wednesday in New Delhi, unveiling its new logo depicting a changed stance to enhanced technology, precision and efficiency.
In an interaction with Moneycontrol, Vikram Limaye, Managing Director and Chief Executive Officer of the exchange talked about various issues, including NSE’s merger with MCX, its IPO plan and way forward in the co-location case.
V-sat and demutulisation were one of the key drivers for the growth of NSE in the past two decades. What do you think will be the key driver in the future? These were two of the many game changers in the last 25 years. For a country’s economic growth, development of markets is exceedingly important. I don’t think we can look to achieve higher levels of growth unless we get the market development right. From that standpoint, NSE is focused on making sure that its mandate for market development and its mandate for making sure that markets develop in a disciplined way, the trust in the markets is enhanced. Equities market, though well prepared, have a long way to go in terms of penetration. We are trying a lot to broaden the equity franchise to retain investors. There are lots of creative things that we are focused on, including fintech solutions and innovations… We are trying to do creative stuff with technology to make sure retail investors are better positioned in terms of investing in markets. We also have to enhance institutional participation and for that some regulatory changes are required as well…
Only 2.5 crore pan card holders are active investors in equity market. How do you plan to increase the penetration?
That’s part of market development. We will talk to investors, the kind of products that we are launching would be tailor-made to see how the markets can be developed. As I said, we need to look at corporate community, how we can get more corporates involved in the commodities market so that from the hedging perspective, we try and develop the right product that would encourage the corporates to hedge rather than having only the financial community and speculators trading in the market. Not that financial investors and speculators are not required, they are also very essential. But you also require the corporates to come in to hedge their business risk in commodities. So we will see what products can be built, how we can build liquidity and depth that broaden the investor base. We haven’t received the final nod for various products under commodities market from Securities and Exchange Board of India (SEBI). We have filed for our product approval, SEBI will go through its process of inspection and whatever it has to do to give the final approval.
What are NSE’s plans on merger with MCX?
MCX has already filed what they had to file. It would be inappropriate on my part to say more than what MCX has said. MCX is a listed company and has put in all the disclosures about how they look at the situation. They have made a filing with the exchange and laid out their strategic options and what all is in for the shareholders.
When do you think the co-location case will be resolved? Will NSE be able to get permission for IPO?
We have started discussion on the issue. It has been talked about for four years now. SEBI has completed its investigations and has issued a new show-cause notice. We, now, have to begin the conversation and resolve the matter. The matters that were raised in terms of gaps and controls, those have already been fixed. But I can’t put out a timeline for SEBI.
IPO, too, depends on co-location case. Unless the case gets resolved, I can’t say about the IPO. Because depending on the resolution of the case, we will have to file our draft red-herring prospectus (DRHP). So unless that gets settled, I can’t say about the IPO’s timeline.
A lot has been done in equity markets over the years. How does the exchange plan to augment trading in bonds, commodities and currencies?
We will be having a separate segment as a part of the Exchange. There is no new legal structure or subsidiary… It will be only a new segment.
We have filed new products with SEBI and are yet to receive their approval. Once we get those approvals, we’ll announce. They are in fixed income, equities, and currencies and across various asset classes.
During the media address, the CEO went on to share his views on various issues central to market regulation and functioning-
On increasing depth in spot market rather than derivative market-
Limaye said that both, SEBI and NSE, are focused on facilitating delivery base contracts on commodities.
“Of course, you can’t do that in crude. But if that relates to bullion and metals, we will also try and work in that direction of having more delivery based contracts,” he said.
He further said that the government is also thinking through some changes in the policy related to gold. Thus a potential spot market for gold could be in the offing which would be the area that the NSE would be “interested in developing”.
“But it will require regulation and government’s support to form a view. If that is the case then we will be interested in participating in a gold spot market,” Limaye said.
On SME companies being listed-
According to NSE, about 137 companies are already listed on the stock exchange and another 50-60 companies could get listed in this fiscal.
“We have seen investor base broadening in this segment. Beyond HNI, some institutional participation can be seen. While SME emerges as the equity platform, we have another joint venture with SIDBI which is receivables exchange. Here, we are discounting bills of SMEs in order to give them upfront working capital against their bills as per the credit profile of the customer,” he said.
He further added that the platform was receiving huge support from the government even in the form of policy and regulation.
“So it will be dealt with in both, debt and equity. SMEs is an important landscape for us and we have dedicated teams focused for both, receivables exchange and the IPO platform,” he added.
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