Panel discussion on World Stock Exchanges held at ISB

Paul Bennett, Chief Economist and Head of Research Department, New York Stock Exchange said, “We can have common branding, but it is important to maintain a sense of the regional market.” He said that globalisation is more about economies of scope as per economics parley. There are a number of common elements – branding, nature of the product etc. At the same time it is important to have regional regulations in place (a good example is Europe). He informed that NYSE is in talks with Euronext for a merger. He further said that equity markets should be well regulated, and that the prerogative of local regulators is very important. Bennett concluded on a bullish note, “Markets of the future are going to be much more cross-border and global.”

“Mergers seem to be the wave of the future,” noted Josh Felman, Head, International Monetary Fund, India office. Felman pointed out that it is not surprising that exchanges are thinking of mergers during this phase of sweeping globalisation. He, however, recalled that in late 90s and early 2000, a number of alliances and mergers were proposed, but failed. This was, firstly, because of a need to link the IT platforms. Secondly, trading and listing roles were not unified, and thirdly, due to governance problems. Felman concluded that though mergers seem to be the flavour of the month, globalisation and jurisdiction shopping will pose major problem for regulators. He set two questions to sum up his thoughts,”Does ‘one size’ fit all?’ and ‘Is regulatory cooperation possible?’

Ravi Narain, Managing Director and CEO, National Stock Exchange of India Limited, spoke about the Indian context. He said that the NSE was a fairly young exchange – 12 years old. Older perception of an exchange was more of a utility or a monopoly – specialising in specific products. This is no longer true. Now, an exchange participated in all areas – derivatives, currency etc. “Years ago, a typical exchange used to be a staid enterprise, just a utility. We have travelled a long way. Today exchanges realise the importance of derivatives,” he said.

Narain said that present business models are in line with revenue streams “Technology,” he said, “has allowed us to think of new products and service streams.” Speaking about the challenge that regulation poses, he said, “Exchanges is one of the most heavily regulated businesses.” He was upbeat about the fact that technology will induce competitiveness and that the complete break down of national monopoly was significant.

PH Ravi Kumar, Managing Director and CEO, National Commodity and Derivatives Exchange Limited (NCDEX) said that trading in commodity is mostly retail, and that future volume on commodity exchanges has overtaken the future volume on the stock exchange. He pointed out that the regulatory divide in the county is strong – this, according to him, was the main reason for having two different exchanges.

The discussion was moderated by Pradeep Yadav who is W.Ross Johnston Chair in Finance, Price College of Business, Oklahoma.