RBI's inclination towards FDI in stock exchanges alarmed the players and the stake holders alike. The article focuses on the need for FDI in stock exchanges in India, its benefits and consequences. It also discusses the part played by FDI and other alternatives to build Global Indian exchanges and the role of the Regulators in promoting and controlling100% FDI in the Indian exchanges.
Indian
financial markets have become dearer for the foreign
investors, as participation of the retail as well as
the Foreign Institutional Investors (FIIs) in the Indian
financial markets has been increasing consistently.
This growth leads to an increase in the volumes of the
Indian exchanges, pulling more traders and investors
into the scenario. This kind of demand made the exchanges
to be efficient and tech savvy. At this juncture, market
regulators are looking for the policy framework of Foreign
Direct Investment (FDI) in Exchanges as more foreign
players are eyeing this opportunity.
Regulation
on FDI in Indian exchanges (Regional and National) is
hazy as there is no codified policy for FDI in exchanges
till today and the body regulating the same is also
vague. It is anticipated to be designed and implemented
instantaneously and is all set to go in the nearest
future, as the number of foreign players to participate
in the Indian exchanges is accumulating from time to
time which includes New York Stock Exchange (NYSE),
Bank of New York, UBS and Temasek. FDI in exchanges
in India started with investments in commodities exchanges
in 2006. Through its affiliate Fid Fund (Mauritius)
Ltd., in February 2006, Fidelity's 9% stake in Multi
Commodities Exchange of India (MCX), acted as a curtain
raiser, which was first of its kind in India, followed
by participation of Goldman Sachs 7% stake in National
Commodities and Derivatives Index (NCDEX) in July 2006
and others (Canara Bank, CRISIL, ICICI Bank, IFFCO,
LIC, NABARD, NSE and PNB) also followed having 93% stake.
The obsession for FDI in Indian exchanges is not limited
to Bombay Stock Exchange (BSE) and other active exchanges
(Stocks and Commodity), but also to inactive exchanges
like the Delhi Stock Exchange (DSE). |
