"I came here to tell the world that India is not lagging behind. I came here to put up the India flag. I am convinced that if there is any country in the eastern part of the world that matches the United States in terms of legal, banking and financial market infrastructure, it is India. We should collaborate more and more," said Jignesh Shah, chief executive of Multi-Commodity Exchange, 48 hours after completing the deal between MCX and New York Stock Exchange.
The NYSE has bought a 5 per cent stake in MCX. Financial majors like Merrill Lynch and Citigroup, and 14 nationalized Indian banks already have a stake in MCX.
For Shah, 41, it is nice to make it to the Forbes list of India's 40 richest people, but it is nicer to get $55 million from the world's largest stock exchange.
Simple and soft spoken, a contented Shah spoke to rediff.com on Saturday. "I came to New York and Washington to share India's confidence. India will soon have the status in the East that America enjoys in the West."
An enthusiastic supporter of Indo-American ties, he said that, "The best demonstrative example of it is the partnership between MCX that was founded in 2003 and one of the oldest exchange NYSE (founded in 1653). That speaks a lot."
Shah was a low-profile employee of the Bombay Stock Exchange between 1990 and 1995 in the IT section. He holds a BE Electronics degree from Vivekanand College in Mumbai.
"When the largest stock exchange invests equity in you, it's an accomplishment. We could convince them on merit. They invested in MCX on a valuation of $1.1 billion. It proves that even though they are older they are not complacent. They are looking for new markets, all the time," he says.
"It (the MCX-NYSE deal) is more than a commercial deal. It is a symbol of strength. They have a heritage and a huge size, but still they have the pace and the agility that match our own DNA of speed and innovation. Whatever we do, we like to do in the fastest and the best way. We don't merely want to be India's best. They selected us because our parameters matched."
NYSE has picked up stake in a market that can only grow further.
There are 140 agri-commodities and 1,400 industrial commodities in India and MCX is set to trade in all of them. In the last few years, Indians are allowed to trade in the commodities and currency markets. India already has a well-developed equity market.
MCX is more about metals and energy. MCX's 10 per cent trading is in agricultural products and this is being criticized for issues related to food security.
"But," argues Shah, "markets are trading minuscule components of the physical agri-market. We hardly trade in agri products. Of our total volume, agri industry volume is about 10 per cent. Ours is largely a metals and energy market: where prices are almost same globally. Gold will cost you the same almost everywhere."
MCX's competitor -- the Multi-Commodity Derivatives Exchange -- does derivatives trading and they are big time into agri products. But Shah defends them and his company.
"Trading in agri-products offers insurance against market volatility. MCDX is serving the utility of the insurance. If you are part of a global economy -- which we are now -- and want to insure our farmers against the ups and downs of prices, then you go and buy options from our exchanges. In America, you cannot survive without health insurance; similarly you cannot survive without insuring your production or consumption materials against price volatility," he says.
On his visit to the United States, Shah explained to American financial experts that India is an old hand at the bonds, currency or commodities markets.
"This is not new to us; we have come out with modern exchanges. I want to represent with facts and figures a case for India. We were late in the currency and bond markets, but these markets are not new to us. The 'option' is an Indian innovation. As a student of history, I can quote that 'options' were prevalent in ancient India too. In Kautilya Shastra, there is a reference that indicates that circa 350 BC, Indians were trading in options," Shah says.
"In this country (the US), there is huge interest in India. Financial markets are the proxy representative of any economy. Equity, commodities, currency, and bonds are the four pillars on which markets are built in any country. At the Asia Society seminar on 'India's Financial Markets' the most questions asked to me were about the corporate bond market. What is the status? How can it develop further, etc? My answer was that even without online trading and other modern mechanisms, India had a great bond market in 1980. We used to refer to it as khokhas, and convertible debentures were the flavour of the day then."
He says that there was impressive volume and liquidity then. In the modern system too, it can be re-introduced. "To trade in bonds, we obtained permission only last year. If the right attention is given to the corporate bond mart, it will be a wonderful market."
Shah is of the opinion that to fund India's growth, the country needs to develop a debt market faster because equity is the costliest way to fund growth. India has a very good equity market, but there is a need to strike a balance between the debt and equity markets.
Shah's expertise lies in connecting technology with financial markets. He is not a player, but the creator of the markets, he claims.
Shah is also not too worried about the 'bearish' market, and thinks that the Chinese financial markets are not really transparent. So, if the Indian government provides access and work on bilateral treaties many Americans will invest in Indian debt market.
Neither is he too worried about instability at the Centre. He dismisses it, saying, "Everyone knows India has a coalition government. It is always little challenging to drive such a government. But we have to compliment the government on how it has managed growth in the last four years."
He is dismissive of the sub-prime crisis in the US, too. "Sub-prime losses are a reality, but we know that markets are subject to extremes. We should not forget that the American economy has absorbed the huge loss of dot-coms and other big companies that went belly up. America still has the ability to bounce back. It has the ability to reward innovations. The pace at which we are collaborating is the only problem."
On the future of the markets, he says, "We have launched the carbon credits business. It is becoming a very big business. One of the biggest businesses in the next ten years will be carbon credits. Environment awareness is spreading fast. Everyone wants to be carbon positive. Everybody is putting restrictions on carbon emission. . . hence, carbon credits will be a valuable asset for nations."
MCX does a daily turnover of more than Rs 100 crore (Rs 1 billion) in the carbon credits market.
The eastern part of world is a producer of carbon credits; and MCX provides the platform to buyers and sellers of these credits. MCX has also launched futures contracts for platinum and palladium.
Shah plans to use the latest funding from NYSE to tap the more than 10,000 market yards in rural India. The exchange also has an ongoing community partnership programme.
"We will set up a rural infrastructure with this money and tap commodities markets. We will do price discovery, and connect Gramin Suvidha Kendras, our rural programme," says Shah.
Shah is happy to be in New York. He says, "When I look at the New York skyline, I feel there is electricity in air. The only other city that gives me as such energy is Mumbai. To some extent, Hong Kong too is for people like us."
"I fear nothing in my business, except the pace of innovation, which I want to continue at high speed," he says.
He wants us to believe his conviction. "I want to grow beyond infinity," he adds.
Image: Jignesh Shah, CEO, Multi-Commodity Exchange at the Asia Society seminar in New York. | Photograph: Paresh Gandhi
