Mumbai: A new stock exchange in India opens for trading on Monday, pitching the country’s main commodity bourse into a three-way battle with the two established incumbents as they look to attract investors around the world.
The new venue, MCX-SX, will trade more than 1,100 equities, develop derivatives such as futures and options and launch its own index of leading shares, the SX-40.
It was formally unveiled at an event attended by Indian Finance Minister Palaniappan Chidambaram in Mumbai on Saturday.
MCX-SX is the latest venture from Multi Commodity Exchange of India, India’s largest commodity exchange, and its arrival underlines the bourse’s ambitious plans to shake-up the duopoly of the older Bombay Stock Exchange (BSE) and its newer rival, the National Stock Exchange (NSE).
The BSE’s 5,100 listed companies are nearly five times the number listed on the NSE, but the value of trades, number of shares traded and share turnover on the NSE is around four times higher than those of its rival, according to data from the World Federation of Exchanges.
The new entrant is aiming to capitalise on upheaval among domestic exchanges by using superior technology, rules allowing companies faster access to markets, more liquid shares and an index it argues is more representative of Indian industry.
However, its arrival also follows a period of regulatory scrutiny over the controversial issues of high frequency and electronic trading. The NSE, which is widely credited with establishing its dominant position through the use of superior technology, attracted unwanted attention in the aftermath of a “flash crash” last October, which saw a sudden 16 per cent drop in its main NIFTY index. Although the problem was traced to an order by a broker, it reopened a debate over the controls needed to maintain stability in a market trading at ever-faster speeds.
Meanwhile the BSE, Asia’s oldest bourse, is under new leadership following the unexpected departure of its chief executive last year, and attempting to make up some of the ground it has lost to its rival in recent years.
MCX-SX said it would focus on inclusion and have a strong social impact. “At the same time, we realise that creating financial markets that are complete, globally competitive and technologically sound will be important to revive faith of global and domestic investors in India,” said Jignesh Shah, vice-chairman of MCX-SX.
“I think MCX may be able to make a dent in the market, but it will be a slow process,” said Prasad Dahupte, managing director at Varhad Capital in Mumbai. “What is the differentiating factor for this exchange? I don’t see one.”
Others point to MCX’s success in commodities and a more recent move into currency trading, along with technology provided by its second main investor, Financial Technologies, a market services group.
“The track record of the group behind this exchange has have been very entrepreneurial and innovative,” says Rashesh Shah, chief executive of Edelweiss, a Mumbai-based brokerage. “There is a market opportunity too, given India needs many stock exchanges to push new asset classes, given there are a lot of instruments that are not well traded here.”