Entry of new players and inclusion of varied asset classes like commodities, currencies and power beyond the equity is expected to drive the domestic exchanges turnover to $10 trillion by financial year 2014, from the current turnover of $4 trillion. According to IDFC-SSKI research report on domestic bourses titled Indian Exchanges?The Final Countdown?, the growth in the turnover of domestic exchanges would be spearheaded by the nascent but high potential commodity exchanges.
By FY 2014, commodity exchanges are expected to generate a turnover of $4,184 billion registering a CAGR of 32% from its current turnover of $ 1,050 billion. Similarly during the next five years period equity exchanges is expected to record a turnover of $ 5,256 billion and currency exchanges $960 billion from their current turnover of $3,042 billion and $240 billion respectively.
Transaction fees that are charged for every trade facilitated on the exchange platform constitute 60% to 80% of the total revenues of the bourses. With equities being the only available asset class that could be traded on sophisticated platforms till recently, the segment has registered a strong 46% CAGR in turnover over the last 14 years and contributes 70% to the industry turnover. During FY 2009, while equity constituted 70% of the industry turnover, commodity and currency trading constituted 24% and 6% respectively. However, going forward commodities valued at 45% of India?s GDP, commodity exchange is in a position to offer high growth potential.
The report states, ?With global benchmark of derivative markets at 30-40x the underlying physical market, we believe commodity exchanges (commexes) offer high growth potential. In this backdrop, we expect the share of commodities segment to almost double to 40% of the industry turnover in the next five years?.
In the equity segment while the NSE continues to occupy the number one slot with 93% market share during FY 2009, MCX tops the commodities trading with 87% market share while in the currency derivative segment both NSE and MCX-SX commands nearly 50% market share while BSE has less than 1% market share.
