India’s stock exchange ecosystem requires greater competition and collaboration to develop new platforms and products, said the chief executive of Metropolitan Stock Exchange of India (MSEI), as the regulator’s decision to cap weekly expiry days has dealt a setback to its equity derivatives foray.
“We need competition because our Prime Minister’s vision of growing [India’s economy] from $4 trillion to $10 trillion will require multiple marketplaces and robust infrastructure,” Latika Kundu said during the Global Fintech Fest in Mumbai.
The Securities and Exchange Board of India’s (Sebi’s) recent move to limit weekly derivatives expiries to just two days per week across all exchanges could pose a challenge for emerging exchanges looking to enter the derivatives segment.
Bourses must choose either Tuesday or Thursday for their weekly derivatives expiries. However, with the National Stock Exchange Ltd settling derivative contracts on Tuesdays and the BSE Ltd on Thursdays, newer players like MSEI are left with no unique expiry window.
MSEI had planned to launch a derivatives contract based on its flagship SX40 index. However, as overlapping expiry days would likely push traders toward exchanges with higher liquidity, such as the NSE or BSE, it may be difficult for MSEI to attract sufficient trading volumes.
Market structure risk
Previously, Kundu had told Mint that assigning an exclusive expiry day to MSEI would be essential to creating a healthy competitive landscape.
“If that is taken away, we risk reverting to a duopoly—or even a monopoly—because the equity cash and derivatives markets are deeply interconnected,” she had said when Sebi’s two-day expiry proposal was still under consultation.
In July, MSEI raised ₹1,000 crore from Peak XV Venture Partners Investments VII, Share India Securities Ltd, Trust Investment Advisors Pvt. Ltd, and Jainam Broking Ltd, as part of its strategy to expand operations and enhance market presence.
MSEI had raised ₹238 crore in December from investors, including Billionbrains Garage Ventures, the promoter entity of Groww; Rainmatter Investments founded by Zerodha; Securicorp Securities India; and Share India Securities.
