Lower costs won’t lower regulatory compliance

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SummaryEven though he is launching a new stock exchange in difficult stock market conditions, the promoter and Vice-Chairman of MCX-SX Jignesh Shah appears full of gusto and zeal.

Even though he is launching a new stock exchange in difficult stock market conditions, the promoter and Vice-Chairman of MCX-SX Jignesh Shah appears full of gusto and zeal. He tells Ashish Rukhaiyar that 80% of the volumes comes from equity derivatives and not much capital formation or bond market development is taking place. This, he says, leaves a big space for a new exchange to deliver capital formation, bond market development and all-round market development. He has also announced 35-50% lower costs than other exchanges.

How do you see the exchange space panning out in the near future? As there are already two national level exchanges, how do you justify the need for a third exchange?

A full-fledged capital market is the need of the hour for India. Globally, if you look at any developed economy, equity constitutes only 13% of the capital market and other asset classes—debt, corporate and government bonds, interest rate futures, currency, SME, etc—constitute the remaining 87% of the market. While everyone says that we have two national-level exchanges, I think not much has been done to develop this 87% of the market segment, which, in a way, remains unexplored. Here, I want to explicitly state that the government, regulator and the policymakers have done enough and everything to develop the capital market, more so during the last 10 years. Sebi, as a regulator, has created a very conducive environment for 360-degree development of our markets. It is important for the exchanges to play the developmental role and invest in research, training and education to get the best outcomes from the capital markets. In addition, exchanges should also provide the right feedback to the regulators and policymakers on a continuous basis, to evolve right course of direction and growth. This will enable the exchange industry to meet the government objective of inclusive growth.

Exchanges which claim to have achieved nirvana appear to be contented that they have achieved everything required, but they are not acknowledging their severe shortcomings, wherein 80% of the volumes belong to equity derivatives and not much capital formation or bond market development is taking place. This leaves a huge responsibility available to the new exchanges, to take up the agenda of all-round market development.

The US has a fully developed capital market system with 10 exchanges and 76 alternate trading systems for a population of 300 million people. India has a population of 1.2 billion and

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