BSE's global exchange off to slow start

Trading in other derivative products in currency, commodities expected to begin soon.

BSE's India INX, the country's first international exchange, started trading on Monday at GIFT or Gujarat International Finance Tec-City. Trading remained confined to equity derivatives, more specifically index futures, which registered lukewarm volumes. 

On the first day of trade, only 37 contracts of Sensex 50 futures and another two contracts each of Sensex January and Sensex February futures were traded, going by data on the exchange's website on 6 pm.

Trading in other derivative products in currency and commodities is expected to begin soon.

"Volumes will pick up in a few months," said an expert. "There has to be a compelling case for business to shift to India from other international exchanges. If we compare the different international financial services centres (IFSCs), India still has a long way to go to match up to some of the other exchanges," he said.

The exchange will be a beneficiary of several tax sops, including exemptions from stamp duty, service tax, dividend distribution tax, as well as commodity and securities transaction tax (STT).

This, feel experts, will eventually encourage a lot of investors and traders to take up positions in derivatives products through the route of GIFTCity.

"STT is one of the biggest sore points for investors participating in derivatives and the new exchange will eliminate that. A lot of Indian traders dealing in equity derivatives from Singapore and Dubai could be tempted to set up desks here," said a broker.

India INX will be open for trading for 22 hours every day. The exchange will open for trading activity daily at 4 am when exchanges in Japan open, and close at 2 am when exchanges in the US close. 

BSE will be investing about Rs 500 crore in the international exchange over the next three years.

India INX will be the fastest international exchange in the world in terms of order response time, with a median trade speed of four microseconds.

This is better than BSE's domestic exchange at Mumbai, which has an order response time of six microseconds.

In comparison, the second-fastest international exchange at Singapore has an order response time of 60 microseconds. 

As many as 250 trading members have expressed interest to function at India INX. The latter and the Indian Clearing Corporation had commenced mock trading from India INX's data centre at GIFTCity from December 17 last year.

Several emerging IFSCs around the world, such as those in Shanghai and Dubai, are aspiring to play a global role in years to come. London, New York, and Singapore are among the global financial centres. 

Image: Prime Minister Narendra Modi inaugurates India's first international exchange, India INX, in Gujarat International Finance Tec-City (GIFT) in Gandhinagar, on January 9, 2017. Photograph: Amit Dave/Reuters.