India's National Stock Exchange is having a busy year with a regulatory probe into whether some brokers received early access to its servers, an investigation that has delayed its initial public offering (IPO) until at least next year.
Vikram Limaye, who took over as the exchange's chief in July, spoke to Reuters reporters Abhirup Roy and Devidutta Tripathy about the changes he is making, his ambitions for the exchange -- including getting into debt and commodities -- and the latest on the probe and the IPO.
(This interview has been edited for clarity.)
Q: It has been about two months since you took over as CEO. How much progress have you made improving stakeholder relations and strengthening controls and processes?
A: There is a substantial improvement on all fronts ... To the extent that what was done in the past has caused any kind of issues with any of these stakeholders, those are certainly on track in terms of being resolved. We are getting appropriate firms engaged to make sure we conduct all the reviews and tighten areas that need to be tightened.
Q: What about in terms of changing the corporate culture in light of the regulatory probes impacting NSE?
A: It is my view that this issue could have been managed a lot better, and we would not have been where we are ... It has escalated and run out of control because it was probably not handled in a proper way ... I have certainly made it absolutely clear that we have to conduct ourselves in a different way. We have to come across differently. Internally, as well in terms of better collaboration and coming across as being more transparent, helpful, collaborative with the external community.
Q: The regulatory probe into the allegation that some brokers got unfair access to NSE’s co-location servers has been ongoing. Where are things at?
A: We are awaiting a report from Ernst & Young. If you recall, Deloitte was engaged to review the futures and options market. E&Y was engaged to do cash, currency and interest rate futures. So their report is anticipated ... There was a show cause to the NSE and a show cause notice to 14 employees ... SEBI has also engaged Deloitte and E&Y to conduct an exercise with brokers that was mentioned in the Deloitte report. That process has also started.
Q. Do you see any chance of the IPO happening during this financial year by March?
A: To do an IPO by Feb. 15, you have to launch the IPO by end of January. To do that you have to have filed your draft red-herring prospectus by December, assuming that you give SEBI one month to review comments, finalise, etc. ... To anticipate that SEBI would reach a conclusion to settle under consent, complete all the internal processes that we would be in a position to prepare the revised (IPO) document and file it in December is exceedingly unlikely.
Q: There was a big trading disruption at NSE in July. What measures have been taken to prevent a recurrence?
A: We’ve done a series of things to make sure that our contingency steps, our standard operating procedures, everything else is also fixed in order to address something like this if it were to crop up again ... We are tightening our own disaster recovery transition times and making them much faster.
Q: Extending market timing in India has been a recent area of debate. What is your view?
A: We need to provide a level playing field for Indian investors, retail or institutional, to be able to hedge event risk that happens post-1530. For the foreign institutional investors, they can go and do a NIFTY trade on Singapore when India is shut. The Indian investor is taking overnight risk, weekend risk, late-night risk when other markets are open. For that reason, you should at least provide an index hedge even if you don’t keep your cash markets open till 2200 or 2300, or whatever you decide.
Q: What are the key focus areas for growth at NSE in the near future?
A: I‘m hopeful that the bond markets will see more robust development over the next 12-plus months. That is an area of focus certainly for us ... I think it’s important to fund the country’s growth, and it can’t be done only on the back of bank financing ... Second area is commodities. There, while SEBI has now allowed the brokers to combine their equities and commodities platforms, the next step is to allow exchanges to operate across all asset classes.
Editing by Rafael Nam and Robert MacMillan; The views expressed in this article are not those of Reuters News. This article is website-exclusive and cannot be reproduced without permission