The oldest exchange of the country faces winds against a level playing field between the exchanges of values, and is working towards the same. In an interview with the Business Line, the CEO and Managing Director of BSE, Sundaraman Ramamurthy, said that no price war or persecution of market participation is involving, but building internal efficiencies. Edited experiences:
How is the EEB working to increase its market share in the derivative market share? Are you betting on product innovation, prices or a differentiated approach to market participants?
More than others, I compete with myself. So it is an endless trip, because I always have to be better than what I was yesterday. We do not like price or competition wars. We want better efficiencies, which markets will do. Our approach is in alternative products for the benefit of society.
We have our clear goals. Deepening and expansion is what we are seeing in terms of derivatives. Automatically, that will culminate in more volumes and more profits, which is what we have seen. Our idea is not a specific number or a market share, but a leveling playing field. Where market participants will decide what exchange they are giving them benefit and trade.
Old faced with a level playing field …
We face the winds against with a more leveling playing field between exchanges and we are working very hard in the thesis areas.
The first area is the best price execution. While regulators have clearly directed exchange exchanges that should be the best price execution, some of the runners still have software that does not provide a level game field. Because of this, the client does not obtain the price advantage of a better exchange, also unilaterally incentive the risk of concentration that arises from that.
The second area is the issuance of a common contract note, which has somehow dragged the legs for a while. With luck, it should be at the end of April. These two should provide a much more level playing field.
As a first -class regulator, how is the EEB adds more controls and balances in the verification research process for SMEs to guarantee better quality lists and avoid cases of bad practices recently seen, such as Gensol engineering?
The regulatory process in all countries, partly in India, is an evolving process. Then, with each event, there will be a new regulatory formulation.
With respect to SMEs, many conditionalities have bone brought by the regulator, which brings uniformity between both exchanges. Therefore, there is not much reach for companies to take advantage of any particular exchange rule. They have to specifically the purpose of raising funds and ensuring that it is within the allowed final use. If the portion of the work component is high, or there are frequent changes in the key management personnel, or the history of the promoter, will now raise the eyebrows.
The regulatory process is becoming more strict to ensure that appropriate people obtain the funds, which is very important. There are 6 SME of millions of rupees, or that only 1,100 are listed today. There is a long way to go.
How do you expect the change of proposition of Sebi to a “future equivalent” method to calculate open interest in capital derivatives to affect their volumes and the combination of participants?
The proposal to move on to an equivalent futures method to calculate the open interest in capital derivatives is to mitigate the risks derived from different options, with several raffle prices, which expire the same day.
Some of the concerns in the industry can be measured, disseminate, disseminate, at what frequency, the number against which it will be monitored and any action that emanates for any brave atypical. I understand that the market is not against the numbers written with better stipulated thresholds. The group was if it rises, since it defeats the purpose of reducing risks.
I feel that the market appreciates and understands that the future equivalent method is a good measure and the reduction is the right path. Some atypical values will still be affected, and should be affected. That is the very purpose of regulatory change.
How would Sebi separation from the property of the compensation corporations of the stock exchanges that structurally affect the EEB and its businesses?
Compensation corporations perform key collateral management roles, risk management, compensation, liquidation, providing interoperability and identifying the risk through the risk reduction model. Currently, they are totally heroes by exchanges of values.
If it is an independent entity, what benefits would reap the market are the thought processes. Thought processes are really correct, but nuances make life easier or easier.
So what should be the participation? How can it become independent? How can financial independence be guaranteed? The Miis are all the capital Guzzlers. All are fixed cost companies. So who will provide the fixed cost capital? These questions arise.
The jury is not outside yet. But the impact on stock exchanges will defend how it is finally implemented.
What challenges has faced the EEB and what plans are they advancing?
It was an institution inherited with less moral and motivation due to incurring operational losses in 7 of the last 10 years, and not advancing derivatives. It had low older cash and technology market volumes, basically more like a ship without rudder. So, that was the EEB when I entered. The first year’s thinking process was to make the organization more vibrant and relevant, and worked. The second year we said that vitality is working and that we should do something else. The deepening and expansion of the markets was an additional objective. We add more runners, more FPI and more racks in the data centers. Then, in the third year that we have decided that we will focus on the client’s delight. Our feeling is that competitions are not local, they are global. There is a clear mobility of capital in jurisdictions. Talent in jurisdictions. There is no reason for anyone to stay with any country and any stock exchange. In this situation, if you have to play a significant role, you must take care of the client’s delight. It can only happen when it has a wonderful infrastructure instead with a good service mentality. Then, human infrastructure, physical infrastructure, technological infrastructure, technical infrastructure. These are all the current objectives. So, we feel that our trip is well started.