Multi-asset brokerage Newedge today launches its onshore Indian operations in Mumbai with an initial focus on providing cash equity and equity derivatives to institutional foreign investors.
Headed by managing director Jerome Burban, Newedge Broker India Private Limited employs 20 staff and holds membership and licenses to trade on the National Stock Exchange (NSE) and the Bombay Stock Exchange.
Burban was most recently head of the Singapore office, from where he also ran the India business. He had previously spent five years in India as head of sales for SG Securities in Mumbai, before Société Générale's brokerage arm Fimat merged with Calyon's brokerage unit to form Newedge at the start of 2008. Burban will divide his time between Mumbai and Singapore in his new role.
Newedge will initially focus on listed equity products, and sees the biggest demand likely to be for index futures, says Pierre Gay, Asia-Pacific chief executive at Newedge in Hong Kong. The company will expand its offering as and when clients are able to trade other products and need brokerage services for them.
As for target market share, Gay tells AsianInvestor he is cautious about simply seeking market share, and feels it's more important to look at how profitable the market share would be. He says the central aim is to be a top 10 broker in India by volume. The firm will be competing with local brokers, international brokers such as CLSA and Man Financial, and banks such as Citi and Standard Chartered.
Gay sees growth as most likely to come from non-Indian customers seeking access to the onshore market. How quickly that growth comes, he says, will depend on how fast these existing and potential clients can get approval to trade in India as foreign institutional investors. He is optimistic on this front, due to strong demand for such licences from institutions and because the regulator is looking to speed up the approval process.
He emphasises the importance of having a local presence. "Being close to the exchange and the market is seen as very important by clients," Gay says. "It means you are quickly aware of any changes that will affect the business." It also brings proximity to the country's financial regulators, in particular the Securities and Exchange Board of India and the Reserve Bank of India (RBI), which Gay says is also very important.
Indeed, the authorities are likely to give particular scrutiny to companies involved in the derivatives business -- even those that do not manufacture the products -- given that such instruments have come under heavy fire in India in recent years. There have been issues ranging from losses sustained by corporates on currency derivatives trades and related lawsuits against product providers to much-criticised bans on trading of certain commodity futures last year in response to high food prices.
And while the Indian stock futures and options market is well developed -- last year the NSE was the top market by volume of single-stock options in world and number three in index futures -- neither currency futures nor credit derivatives are allowed yet, despite much talk of introducing them.
The government certainly appears to want to push ahead with opening up the derivatives market, going by moves such as last week's announcement by the RBI on FX options. The central bank has proposed to allow importers and exporters to write and sell put options in foreign currency-rupee and cross-currencies and earn a premium on them. It has also proposed that banks be allowed to offer plain-vanilla cross-currency options to resident Indians who need to turn their rupee liability into foreign-currency liability.
Newedge is a 50/50 joint venture between French banks Société Générale and Calyon. It provides clearing and execution for futures and options and for money-market instruments, bonds, FX, equities, and commodities in the OTC markets. The firm also offers services such as prime broking, asset financing, electronic trading and order routing, cross margining and centralised reporting of client portfolios.