Located at the strategically important GIFT IFSC, India’s first international exchange, the India INX, has set a goal to grab a quarter or more of the market share when it comes to the total offshore NDF market. Although hit by the pandemic, the exchange which operates for 22 hours in a day, has been witnessing growth in trading volumes and its average daily turnover, said V Balasubramaniam, MD & CEO, India INX in an interview with Kshitij Bhargava of Financial Express Online. Talking in detail about the exchange that currently, dealing across multi-assets like equities, commodities and currencies derivatives, it’s MD & CEO talks about new products that are in the pipeline and how the exchange is managing trades during the pandemic.
Earlier this year you had said that India INX would grab about 25-30% of market share of the total offshore NDF market in 3-6 months; halfway down the lane from the set time period where do you find yourself now?
The exchange launched monthly and weekly derivative contracts on the Indian rupee on May 8, 2020 for international investors and non-resident participants who currently participate in rupee trading in various offshore markets. The Exchange aims to onshore the offshore Rupee Dollar markets, and offers such participants, an additional trading venue at par with the other offshore market platforms. Long trading hours of 22 hours and USD settlement at IFSC helps to improve access for overseas participants. Within a short span, daily turnover in rupee derivatives at India INX is averaging more than US$ 200 million, with a market share of close to 84% among GIFT IFSC based exchanges. Against the total offshore market, India INX has a market-share of close to 5 percent.
How has the response been for the rupee derivatives since the launch?
India INX’s rupee derivatives segment has been gathering pace recently like mentioned earlier, but it’s really come to the fore in terms of investor awareness and maturity. These contracts meet the growing needs of offshore investors where a huge market exists, and complements it with enhanced liquidity, reliability of India INX’s trading systems and software, extended trading hours enabling participants to react to developments instantly and the regulatory support of GIFT city. These contracts have started off on a positive note.
How have the trading volumes been across products amid the pandemic?
Even during the Covid-19 pandemic & lockdown, India INX was operational for 22 hours nonstop with no technical outages or system glitches. Even though 95 percent of all our staff were working from home, we functioned at 100 percent. Trading volume on the BSE’s India International Exchange have been growing exponentially ever since it commenced trading activities on January 16, 2017. Its average daily trading turnover has crossed over USD 2.92 bn (INR 21,893 crores approx.) mark in the month of July 2020, a 30% growth in average daily trading volumes as compared to previous month. Even in August 2020, the ADTV has seen a marginal increase to USD 2.95 billion, driven by a substantial jump in market participation.
In our flagship India 50 Index derivatives, total turnover has significantly increased from US$ 24 billion in March 2020 to US$ 60.2 billion and US$ 57.7 billion registered in July and August 2020, with a market share of 57 percent against comparable index in Singapore. Similarly, for Gold, our flagship commodity contract, the total turnover has increased from US$ 2.6 billion in March 2020 to US$ 5.1 bn and US$ 3.6 bn in July and August 2020, with a market share of 75 percent against comparable contracts in Dubai.
What are your product offerings at this juncture? and are there any new products in the pipeline for this fiscal or the next?
India International Exchange (India INX) has pioneered several firsts at GIFT IFSC since launch in January 2017. India INX is the first and leading international exchange in GIFT IFSC with market share of over 80% to introduce a single platform across multi-assets i.e. equities, commodities and currencies derivatives. India INX’s equity product portfolio encompasses flagship INDIA50 and S&P BSE SENSEX Equity in Index Derivatives, and 131 Single Stock Futures. In commodities, the exchange offers futures in Gold, Silver, Aluminium, Lead, Nickel, Copper, Zinc and Brent Crude. In the Currency segment, the exchange offers futures in pairs of EURUSD, INRUSD ,GBPUSD, USDINR, JPYUSD. Among debt securities participants can trade in Masala bonds, Green Bonds and Foreign currency denominated bonds. Trading in Gold Quanto and Silver Quanto Future contracts commenced from August 31, 2020. The exchange also offers a primary market platform for debt securities and proposes to offer additional fund-raising facilities like depository receipts once the required infrastructure is in place.
New products for which we are awaiting regulatory approval for trade in Natural Gas, Quanto Futures on Copper, Brent Crude Oil, Depositary Receipt (DRs) and Foreign equities. We also seek to work closely with the Government and the regulators to launch spot exchange for bullion as and when the framework is finalized.
How has it been in terms of corporations looking to raise funds through India INX? What advantage does India INX bring into the play?
The Global Securities Market platform of India INX, which caters to the needs of Indian and foreign issuers to raise funds has emerged as the leading primary markets platform at GIFT IFSC with 100% market share in Medium Term Notes (“MTN”) establishment and 99% market share in listed bonds in GIFT IFSC. As on August 31, 2020, the Global Securities Market has cumulatively established USD 48.57 billion of MTN and listed USD 22.64 billion of debt securities including masala bonds and green bonds.
The distinct competitive advantages INDIA INX offers for global investors are a liquid and deep market which is open for trading for 22 hours a day, robust governance and risk management aligned with PFMI, higher position limits with single market access and a wide choice of collaterals such as Foreign securities, Bank Guarantees, Fixed Deposits, cash, Government Securities, AAA rated international securities etc.
What kind of edge does GIFT IFSC bring for you and for investors?
The GIFT IFSC is a gateway for inbound and outbound business from India, and fast emerging as a preferred destination for undertaking International Financial Services. The GIFT IFSC covers banking, insurance, capital market and allied services covering law firms, accounting firms and professional services firms. It provides very competitive cost of operation with competitive tax regime, single window clearance, relaxed Company Law provisions, International Arbitration Centre with overall facilitation of doing business.
Located at the crossroads of continents, GIFT city in India provides unprecedented conditions and opportunities for its participants and investors: legal system based on the principles of the English law, independent regulatory framework consistent with internationally recognised standards, best tax regime, depth and breadth in financial services and instruments’, and English as a working language. For financial institutions searching for an ideal location to set up a service centre and operationalize their transformation, GIFT city offers advantageous tax incentives aimed at facilitating the establishment and development of financial services in India.