Financial Technologies India Ltd has issued a clarification on this article. Read the clarification at the end of the interview.
Financial Technologies India Ltd (FTIL) operates one of the world’s largest exchange network — 10 exchanges, including Bourse Africa which it acquired last month. FTIL Chairman and Group CEO Jignesh Shah, who has been named among the top global innovators and industry leaders by Institutional Investor and FIA (Futures Industry Association), spoke to Palak Shah on the road forward and the public spat with the National Stock Exchange which has put the technology vendor on its 'watch list’.
You sent a legal notice to NSE last month after the latter put FTIL on its watch list claiming there were performance issues on multiple occasions. What’s the progress on the issue?
Well, we are still waiting for a response from them (NSE). I would not like to comment much on this, except that no reason has been communicated to FTIL till date and we haven’t been given an opportunity to present our case. This is against all principles of natural justice. As an NSE-empanelled vendor, FTIL has been providing technology to stock brokers for over a decade now.
Apart from NSE, we are also empanelled with the Bombay Stock Exchange and the National Derivatives and Commodity Exchange. NSE never gave us any indication of any problem. Hundreds of NSE members who have been using our technology for the past 10 years do so even today. However, these issues have been raised when we got into direct competition with NSE in currency futures.
Your software ODIN, the trading and risk management system, has an 80 per cent market share in India. There is a buzz that NSE is planning to approach the Competition Commission for monopolistic practices.
I am not aware of that as yet, but ODIN has been the trading platform of choice for several years powering over 830 leading brokerage houses with more than 80 per cent market share. The reason is simple: efficiency. It’s ridiculous to think that we can force people to use our product. People choose our software even though we charge almost double than our competitors. Our case is similar to that of Google and Microsoft who rule the world market.
You picked up 60 per cent stake in Bourse Africa last month. Why Africa?
Africa makes tremendous economic sense. Bourse Africa is the first pan-African spot and ôor derivatives multi asset exchange to offer trading in commodities, currencies, bonds and diamonds. The exchange will have a hub and spoke model that will connect all the major countries in Africa. Bourse Africa is our tenth exchange. Ultimately, we plan to link all the commodity markets from the eastern part of Suez to Tokyo and provide 24x7 trading.
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What’s the status of the Singapore Mercantile Exchange?
The Singapore Mercantile Exchange plans to offer trading in metals, energy and agricultural goods, as well as freight futures and carbon credits. It will complement operations that FTIL runs throughout Asia and West Asia, including MCX and the Dubai Gold and Commodities Exchange. Global road-shows for the membership drive will commence soon and the exchange is expected to go live early 2009.
You have gone global by tying up with the Dubai and Mauritius governments also to set up exchanges there. You have sold some stake in the Dubai exchange?
The Dubai-based DGCX has gone live and is doing extremely well. As for stake sale, we started off with a 50:50 partnership with the Government of Dubai. We scaled it down to 49 per cent first, and then to 44 per cent in keeping with our motto of value accretion and satisfying local aspirations.
Only four commodities — gold, silver, crude, copper and zinc — generate 90 per cent of the trading volumes on MCX. You have been slow on agri-products, which have a big market worldwide.
Commodity is not a homogeneous asset class like equity. The global trend is that every exchange is a specialist in not more than five to seven commodities. However, developing agri-products like soya and chana for trading is our priority. The growth of MCX last year was 72 per cent, but we anticipate the growth to be 85 per cent this year.
You have been shortlisted for setting up an SME exchange. How do you plan to go about it?
We have applied for setting up an SME exchange. We will work on a hub-and-spoke model and our aim would be to set up at least two to three such exchanges by 2009-2010. Rajkot and Indore are big hubs for edible oil, whereas Ludhiana is a big market for engineering and auto parts. However, language is a barrier for traders in small cities and they do not wish to come to Mumbai to raise money. We would try to overcome this barrier by innovative methods. We would like to develop and nurture the middle segment of the population that continues to be wary of entering the commodity space.
What are the other future plans?
FTIL operates one of the world’s largest exchange network. Apart from 10 exchanges, we also have seven ecosystem ventures. MCX is India’s number one commodity exchange and amongst the ten largest exchanges of the world. Other financial services ecosystems that are planned to be set up include a Clearing Corporation, Warehouse Receipt Corporation and Depository services.
The modern tech-centric financial markets are the new electronic trade routes, similar to silk and spice routes centuries ago that are democratizing global trade and economies.
CLARIFICATION
This interview with Financial Technologies India (FTIL) Chairman & Group CEO Jignesh Shah was done on December 5. The interview quotes Mr Shah as saying that FTIL has not received any response from the National Stock Exchange (NSE) on the legal notice it had sent to NSE which has put the technology vendor on its watch list.
In a statement on December 16, FTIL says, "In the interests of transparency and full disclosure, we had received a preliminary response from NSE on December 6 and a final response on December 10. We would not be in a position to disclose the contents as the matter is currently handled by the legal teams."
