When George Soros, the billionaire investor, makes a bet, the world generally takes notice.
It is no different this time with news, first reported by my colleagues in India, that Soros is set to buy Dubai Holding’s 4 per cent stake in the Bombay Stock Exchange.
It marks a big bet on the Indian exchange story, which is finally getting the attention it deserves.
On Wednesday, the love affair with India’s exchange’s continued as the National Stock Exchange of India and the London Stock Exchange have signed a letter of intent “to evaluate joint strategic business opportunities, and to co-operate together more closely in the future”.
The two will explore the idea of FTSE Group licensing the FTSE 100 Index to the NSE, while the NSE may licence the S&P CNX Nifty (the “Nifty 50”) to the LSE for issuing and trading options and other index contracts.
Not to be outdone the BSE had the UK’s chancellor (finance minister), George Osborne, ring the opening bell to start trading the same day.
Earlier this week Eurex, the derivatives arm of Deutsche Börse, said trading would start in October on its platform of futures and options on the Sensex, the blue-chip index of the BSE.
India is getting attention not merely because of the size of its markets, but because it has not been immune to two trends sweeping the US and Europe: increasing competition between trading venues, and rapid advances in technology that is allowing algorithmic and “high-frequency” traders to make inroads into new markets.
That is prompting Indian exchange to modernise their trading systems – just as their counterparts in Brazil and Mexico are doing.
In turn, this makes these exchanges even more attractive as partners to exchanges in more mature markets, since they are rapidly gearing up to attract these same types of players. Liquidity is now global.
Only a few months ago the NSE launched “colocation”, a service that allows algorithmic and high-frequency traders to place their trading machines in the NSE’s data centre, to shave crucial milliseconds off the time it takes to trade.
The London exchange has a similar data centre, as does the Chicago Mercantile Exchange, the US futures exchange.
In March, the NSE signed a cross-listing agreement with the CME under which the “Nifty 50”, the Indian benchmark index, will be made available to CME for the listing of dollar-denominated futures contracts on CME.
In return, the rights to the S&P 500 and Dow Jones Industrial Average will be made available to India’s NSE for the listing of rupee-denominated futures contracts.
Indian exchanges are catching up with their larger overseas rivals. The big question is whether they will start to look for opportunities abroad, through links like the one hinted at in the LSE-NSE deal, or whether concentrating on their own (vast) back yard will be enough for the moment.
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