After India’s stock exchanges National Stock Exchange (NSE), Bombay Stock Exchange (BSE) and Metropolitan Stock Exchange of India (MSEI) said last week that they will stop the use of local derivative products on overseas bourses inviting critical reaction from MSCI (Morgan Stanley Capital International), Ashish Chauhan, the MD and CEO of BSE said that such overreaction is unwarranted. Notably, NSE and BSE will stop their licensing agreements with Singapore Exchange (SGX), CME Group Inc., Taiwan Futures Exchange and Osaka Securities Exchange, according to the latest decision.
Taking stock of the development, MSCI said that it will consult global fund managers before taking any decision regarding India’s weight cut in the international index. The move will have far-reaching repercussions, as many overseas asset managers use the MSCI index to construct portfolios relating to exchange traded funds (ETFs) and even other benchmark portfolios. According to experts, any reduction in the country’s weight could potentially lead to sharp outflows. The MSCI says that the move is anti-competitive.
Interestingly MSCI’s next review of its indices is scheduled in later in May-18. Ashish Chauhan said that India was well within its right to restrict the flow of information. Further, in the interview with CNBC TV18, Ashish Chauhan said that the bourse is planning to launch cross currency trading within two weeks time.
After India’s decision, Ajay Tyagi chairman of SEBI said that such a move must not be viewed in a negative light or as a ‘retrograde step. Notably, India’s leading exchange NSE had signed the agreement with SGX in March 2000 that allowed it to trade futures and options based on the broader Nifty 50 Index. In a reply to the move, SGX on Sunday had issued a statement saying it plans to develop “India-access risk management solutions.” Meanwhile, BSE today said it will launch cross-currency derivatives and cross INR options next week, in a bid to help increase liquidity in the market.