United Stock Exchange of India

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United Stock Exchange of India
UnitedStockExchange logo.jpg
Founded January 2009
Headquarters Mumbai (Bombay)
Key People Managing Director and CEO T.S. Narayanasami
Products Currency and interest rate futures contracts
Website www.useindia.com

The United Stock Exchange of India (USE) launched on Sept. 20, 2010, offering futures on four currency pairs - U.S. Dollarrupee; EUR – rupee; Pound Sterling - rupee; Japanese Yen - rupee. The exchange, which is the third to offer currency derivatives in India along with the National Stock Exchange of India and the Multi-Commodity Exchange, is owned by a joint public-private consortium of Indian banks and brokerage houses and has paid-up capital of around 1.5 trillion Indian rupees (approx. US$31 million).[1][2][3]

At the one-year mark after the exchange's launch, USE had reached about 22 percent in market share for currency futures in India.</ref>[4]

USE has stiff competition in the currency futures trading market from established rivals MCX and the National Stock Exchange of India, which earlier in 2010 controversially scrapped membership charges for its currency derivatives trading sector. [5]

Background

The exchange received final approval from the Securities and Exchange Board of India (SEBI) to begin operations in currency futures in all the four pairs of currencies on Apr. 20, 2010. In light of this approval, Bombay Stock Exchange Limited (BSE), USE's largest shareholder, officially suspended its operations in the currency derivatives segment.

Following SEBI approval, USE launched its membership drive and over 150 members submitted their applications. Most of the members of BSE are expected to join USE. In addition, new members from the banking fraternity and broking field have shown interest in the new exchange.

The SEBI approved the establishment of USE in January, 2009 as India's fourth public exchange to list currency derivatives, after the National Stock Exchange, Bombay Stock Exchange and Multi Commodity Exchange of India.[6] USE is being heavily promoted by two of its largest owners, state-owned trading company MMTC, India's largest foreign trader, and private brokerage firm Jaypee Capital Services but it has a total of 16 shareholders including several of country's leading banks and financial institutions.[7]

The Bombay Stock Exchange announced Aug. 7, 2009 that it would take a 15 percent stake in the United Stock Exchange, which would then operate as a BSE Group company and seek to increase participation, product range and liquidity of this relatively new group of securities.[8] USE Managing Director T.S. Narayanasami said the tie-up would allow USE to leverage BSE's distributions and exchange technology to "accelerate our plans to be a dominant player in the currency and interest rate derivatives market in India." However, at least one analyst has pointed out that USE's success in trading these contracts will depend on how quickly it builds liquidity, noting that even USE's shareholders will desert it for the three rival exchanges if it fails to do so.[9]

In April 2009, Reuters reported that CME Group was in talks with several Indian exchanges to take equity stakes in them. The exchange reportedly was in negotiations with Multi Commodities Exchange (MCX), National Commodities Exchange of India and the USE.[10] However, India law prohibits non-Indian exchanges or investors to take more than a 5 percent stake in an Indian exchange.

In December of 2009, United Stock Exchange announced that it would waive transaction fees on all trading beginning from its planned launch in mid-January 2010 as a way to promote and boost the market initially.[11] The managing director of 15% USEI stakeholder Jaypee Capital Services, Gaurav Arora, said in December 2009 that the exchange would not charge for transactions "for some time." The move is aimed at boosting liquidity for the USEI's currency futures market, where it will compete with market dominators the National Stock Exchange of India and MCX-SX.

On Sept. 20, 2010, USE was launched and trading volume was considered a major success. Its four currency pairs traded a total of 9.8 million contracts, valued at nearly US$10 billion on day one. It is believed to be a record opening for any derivatives exchange, and represented 52 percent of the total exchange-traded currency derivatives market in India.

In late April 2010 the USE received final approval from regulator the Securities and Exchange Board of India (SEBI) to launch currency futures contracts denominated in four different foreign currencies - US dollars, Euros, British pounds and Japanese yen. USE's largest shareholder, the Bombay Stock Exchange (BSE), has since suspended its own currency derivatives operations and USE now hopes to gain most of that business.[12]

Key people

T.S. Narayanasami was appointed USE's managing director and CEO in early August of 2009 following approval by SEBI and the Government of India. He has had over four decades of experience in the Indian financial sector since joining Union Bank of India in 1969 and has served in the top job at banks such as Bank of India, Punjab National Bank, Andhra Bank and Indian Overseas Bank. He has also served as chairman of the Managing Committee of Indian Banks Association (IBA).[13]

Contract Volume

Year Total Annual Volume* Percent Change
2014 24,819,403 (-)45.0%
2013 45,132,176 --

References

  1. United Stock Exchange of India Commences Operations in Currency Derivatives with Record-Breaking First-Day Showing and 52% Market Share. Press release.
  2. United Stock Exchange begins operations. The Hindu.
  3. United Stock Exchange of India begins currency futures trading. Dow Jones.
  4. India's USE Celebrates First Anniversary. FOI.
  5. Will United Stock Exchange gain currency?. Moneylife (India).
  6. Fourth currency exchange gets Sebi approval. Times of India.
  7. USE to start trading in currency derivatives in July. Times of India.
  8. Bombay Stock Exchange - United Stock Exchange Form Alliance to Develop Currency & Interest Rate Derivatives Markets. PR Newswire.
  9. Will the United Stock Exchange experiment work. Livemint.com.
  10. Chicago Mercantile Exchange to enter India. Reuters.
  11. United Stock Exchange plans to waive fees to lure users. Daily News and Analysis.
  12. USE receives the final approval from regulator. USEI.
  13. Mr. T.S. Narayanasami to Head United Stock Exchange of India Limited. PR Newswire.