Currency futures pre-cursor to full rupee convertibility- Ravi Narain

Mr. Ravi Narain, CEO & MD, National Stock Exchange (NSE) said that with the introduction of currency futures, the nation was closer to switching over to full convertibility of rupee. This, he said, would have a significant impact on the asset flows and trading patterns apart from expanding the number of stakeholders in the currency market.   

While addressing the industrialists under the CEO Lecture series organized by PHD Chamber in the capital today on “The Changing Face of the Exchange Industry”, Mr. Narain observed that the forward market, though vibrant in India, had benefited only limited number of people. But currency market would have a beneficial snowball effect on all those who would like to trade in the currency future market. The trading framework is transparent and enables the participants to benefit from the asset base created by the currency transactions.

The amount of regulation that the hedge fund will face, will go up in the time to come.  Regarding and exchange for SMEs, Mr. Narain said that it was entirely possible to create a liquid and transparent platform however the regulations of such exchanges should be simpler but not weaker.

Since the liberalization, Mr. Narain observed that the relevance of currency market had grown. Earlier major stakeholders of the currency market were importers and exporters who hedged the risk by taking forward cover for the currencies. Now, everyone including a traveler, small time business men, a parent remitting fees for the wards studying abroad etc are impacted by currency movements. “Currency futures are going to impact their day to day transactions and how they conduct businesses,” he added.

Mr. Narain underscored the need for India following best business practices to integrate more closely to the global markets. That would enhance the credibility of the economy and attract more investment and trade apart from driving down the cost.

Mentioning that world-over the exchanges are undergoing rapid changes, Mr. Narain said that those changes also would impact India in a significant way.  Historically, exchanges were opaque private clubs set up to cater to the needs of their members. As the concept gained acceptance and popularity, many significant changes had taken place in their functioning.  From a trading platform, it got transformed as ordinary business entities, with underlying stocks being traded in the same exchanges. Regulations have come up to ensure transparency and accountability in the system. Cross border acquisitions and take –over of exchanges by similar bodies became common. Yet, there are instances when exchanges are going back to their original framework of private liquidity pools, he added.  

Dr L K Malhotra, President, PHD Chamber said the exchanges should emerge as new frontiers for investors. He also wanted the exchanges to position themselves as transparent and vibrant institutions that help the industry, investors, government and the common man.