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ROAD
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Global Custodian: Obviously NSE has had a big hand in helping to shape the Indian capital markets ecosystem. Is there anything still missing in your view? Vikram Limaye: There’ s a lot that can be done from a market development perspective. The list is actually quite long, if we want to broaden the investor base. While 5 % of household savings are in equities today and the equity markets in India are relatively well developed, we need to increase both retail and institutional participation in equity markets. For other asset classes, markets are at very early stages, whether it is bonds, commodities, currencies, credit derivatives, interest rate swaps, etc. Part of it has to do with regulation, part of it has to do with the ecosystem not being developed the way it needs to be developed for these markets to take off. In many of these areas, institutional participation is not where it needs to be. Institutional capital in India is controlled by four different regulators, amongst whom there needs to be alignment to develop a market. Various people have to come together and move in the right direction. Obviously the Exchange also plays an important role. I’ m hopeful of market development because
Vikram Limaye, CEO, NSE, sat down with Global Custodian in Mumbai to outline his vision of where the Indian securities markets need to focus in the sort to medium term.
people at senior levels in government and the regulators are interested in moving in this direction. I do feel that a lot can be done in terms of surveillance of the market to ensure fair market practices and that trust in markets is enhanced. For that, we have to use big data analytics and artificial intelligence to see how we can try and predict patterns of trading and behaviour. From a systemic risk perspective, we need to keep on top of cyber security risks because that obviously is a huge threat. Unfortunately 99.9 % uptime for an exchange is not good enough; it has to be 100 %. And the cast of characters you’ re dealing with for cyber security threats is increasingly sophisticated. Many of them could also be state-funded, so you have to stay ahead of the curve. Investment in technology is critical to be at the cutting edge of prevention.
GC: Will the introduction of a common platform for equities and commodities later in the year make that easier or more difficult? VL: It’ s certainly easier for members, because you’ re trading from one account and to that extent it’ s easier to move margins and collateral across different segments if you’ re on one exchange.
GC: What’ s the impact going to be on competition? VL: The commodities market had a separate regulator called the FMC( Forward Markets Commission). This was merged with the securities regulator, SEBI. So now we have one regulator, which is why bringing commodities and equities together is also feasible. The first step was to permit the brokers to have a unified entity for commodities and equities. Competition will increase with exchanges being permitted in all asset classes.
GC: And that is still on target for October? VL: That’ s right. NSE will be ready to offer commodities contracts from October 1.
64 Global Custodian Spring 2018