With the launch of country’s first international exchange at Gujarat International Finance-Tec City (GIFT) in Gandhinagar, the country is set to leapfrog on the global financial services sphere.
As the Prime Minister Narendra Modi inaugurates BSE’s India International Exchange (India INX) at GIFT-IFSC on Monday, the Managing Director and CEO of BSE, Ashishkumar Chauhan, terms it the beginning of a new chapter in the country’s financial services industry.
“The exchange will create new standards in quality of service and speed of transactions in different time zones,” Prime Minister Modi said while opening the global exchange.
“I have been told that the international exchange would work for 22 hours a day. It will start when Japan exchanges begin and close when US markets end. The exchange will work from sunrise to sunset”, he added.
“My vision is that GIFT City should become a price setter in several financial instruments” he said.
Although the international exchange was inaugurated on January 9, the trading operations are scheduled to begin on January 16.
“India INX is one of the world’s most advanced technology platforms with a turn-around time of 4 micro seconds. It will operate for 22 hours a day to allow international investors and Non Residents Indians to trade from anywhere across the globe,” the exchange said in a statement.
What is the significance of BSE’s international exchange for the Indian financial services industry?
The international exchange will help us compete with other international financial centres such as Dubai, Singapore, Hong Kong, New York, London. Indian individuals are currently not allowed to trade. So, effectively it will be allowing hedging for corporate, which are currently hedging outside India. The stock brokers, who wish to service the rest of the world, would set up their offices and companies here. Foreign individuals, foreign trusts, foreign institutional investors all of them would be able to trade here. India has already exported a large portion of its underlying transactions to Singapore, Dubai and the US largely because of heavy regulations and high tax structures. World futures can’t take place on Indian territory.
The GIFT City, which houses India INX, is part of India but not India. It is like one country, two systems. It matches Hong Kong that helped China to earn trillions of dollars through financial transactions. Most people used Hong Kong as gateway to China, similarly, GIFT City is now seen as gateway to India.
Which securities and financial instruments will be offered on the India INX?
We have proposed to the regulator — Securities and Exchange Board of India (SEBI) — to allow trading in all the products that are being offered in Hong Kong, Singapore, London, Dubai and Chicago. These include currencies, commodities, interest rates and equity derivatives.
We will have not only Indian products but also foreign products. So, effectively you will be able to trade in Google futures, Apple futures, hedge currencies like JPY v/s USD. If the Indian products are traded in Singapore, Dubai, then similar products should be traded here also.
How is it different from other exchanges globally?
Firstly, the technology is different. The technology used at India INX is the fastest in the world with response time of four microseconds. The closest is BSE with six microseconds and Singapore exchange is a distant third with 60 microseconds.
Secondly, with its robust technology infrastructure, it has more capacity than other global exchanges. So, there will be many more instruments available for trading.
Third thing is the cost, which is phenomenally low as compared to other exchanges in terms of transaction charges and in terms of setting up of a company, which is a fraction of amount spent at other international hubs Dubai, Abu Dhabi, Singapore or Hong Kong.
When do you think India INX will start its commercial operations?
It is ready for operations. The mock trading has been going on for last several months. We plan to start operations from January 16. We have already applied for products that will be offered for trading. The SEBI’s regulations on IFSC have already allowed trading in commodities, equities, currency and interest rate derivatives. We will begin trading with whatever SEBI approves.
What are your plans ahead?
We are planning to invest ₹500 crore over the next 3-4 years for clearing and trading at the India INX. The investments will be made through BSE’s International Stock Exchange and International Clearing Corporation as per the SEBI regulations.