NSE recently hosted the 36th IOMA: WFE’s Clearing & Derivatives Conference in Mumbai. Please tell us about the importance of this annual forum to the global market infrastructure industry.
It was a matter of great pride for NSE to host the 36th IOMA: WFE’s Clearing & Derivatives Conference 2019, in the financial capital of India – Mumbai.
NSE has been a leader in establishing the concept of central counterparty (CCP) clearing in India. Since then, things have grown exponentially in terms of size, scale, and complexity in clearing. Many reforms were witnessed in the past and we await a lot more. Worldwide, CCPs clear similar products, and face similar risks and regulations. Therefore, industry collaboration is the best approach to help understand, learn and problem-solve.
IOMA 2019 presented an opportunity for the industry leaders to interact with each other, and the two-day long event proved to be an extremely constructive programme for the industry. It helped industry leaders engage in talks about the future of clearing, the derivatives markets, and the financial market infrastructure that supports them.
Several fundamental and key issues were highlighted and discussed during the programme, such as future of the clearing model, collateral and margining, specific discussions on crypto and FX and derivatives, capital requirements, and operational resilience – including central bank oversight and support, and recovery and resolution of clearing corporations.
Also, the World Federation of Exchanges and Oliver Wyman launched ‘The Future of Clearing’ report which will help the industry take necessary steps on the suggested blueprint for CCPs of future.
I believe, as an outcome of IOMA 2019, the industry will work under the aegis of the WFE for the implementation of discussed plans and the resolution of issues, and will pave the way for better capital markets.
India is one of the world’s fastest growing economies and is set to be the fifth largest in the world by 2020. How would you describe India’s growing presence in the global financial market?
India has remained one of the world’s fastest-growing large economies for a number of years now.
Over the last ten years, national income has grown from US$1.4trn in 2009 to ~US$3.0trn in 2019, with India’s ranking improving from 11 to 5 in terms of GDP, according to the IMF. India’s markets over this period have also undergone a sea change, with market-capitalisation rising from US$1.3trn to US$2.3trn, while market capitalisation/GDP has remained ~90%. Indian markets today are among the most highly traded in the world; India is one of the top global recipients of both FDI and FPI flows, with ~30% of the market with foreign shareholding.
However, markets have a long road ahead, given the projected growth trajectory. The IMF believes India will be in the world’s top three largest economies by 2030, rising to ~US$10trn. Such an economy would need significant amounts of capital to meet its growing investment and infrastructure needs. In contrast to large, advanced economies like the US, bank-lending here (~68% of domestic financial savings) continues to dominate funding for domestic investors. This illustrates the enormous headroom available for market-based funding channels, through both debt and equity. Such funding would not only depend on domestic financial savings, where we see a shift from deposits to markets-based instruments, but would also continue to attract foreign capital, given its long-term potential.
Please tell us more about NSE’s strategic goals for the next five years.
NSE’s strategy is to work on multiple fronts in the coming years. To begin with, we are determined to take our stakeholder relationships to the next level. This area has already shown a lot of improvement in the past few years. We want to be the most trusted partner and advisor of our stakeholders.
Another important area where we plan to work is market development. We believe market development is critical to fund the country’s growth in the coming years. The equity market witnessed immense growth in the last decade, but it still has a long way to go. We plan to develop not just equity but other markets which are relatively young such as bonds, currencies, commodities, and associated markets.
Along with this, NSE is also focusing on international collaborations and inorganic growth. NSE will also focus on growing its non-exchange businesses in data, indices, technology and education. All these businesses have a long way to go in achieving their potential.
We also feel it is our responsibility to help small and medium sized businesses (SMEs) access funds. Already, around 200 SMEs have raised funds by listing on our SME platform ‘NSE EMERGE’.
As an institution of national importance, NSE is working towards making the Indian capital market ecosystem more transparent, robust, and secure. The exchange plans to improve the standards of governance and maintain transparency and trust.
Currently, we have a strong risk management and surveillance system. We are implementing a project to reinforce the existing system. NSE is exploring the possibility of using blockchain technology and machine learning/artificial intelligence to simplify various processes. With its 25 years of experience and futuristic vision, NSE is all set to lead from the front once again.