Too many powerful players have as their main business model profits based on shallow products in a narrow market, whereas what is needed is democratisation of markets.

New Delhi: Jignesh Shah is a maverick entrepreneur who defied convention and competition to create institutions such as MCX, Singapore Mercantile Exchange, Dubai Gold and Commodity Exchange, IEX. These have been bought by global investors such as the NYSE Group and the Government of UAE.
An electronic engineer by qualification, he was included in the list of “Dominant Financial and Futures Industry Leaders” by Futures Industry Association, United States, together with CME’s Craig Donohue, ICE’s Jeffrey Sprecher and Tim Geithner, former US Treasury Secretary. Sought to be wiped out as a free citizen and as a businessperson by former Finance Minister P. Chidambaram and officials close to him, Jignesh Shah talked to The Sunday Guardian about being a survivor of what is popularly known as the “C-Company”. Excerpts:

Q. How did you feel when the Supreme Court set aside the forced merger of NSEL with FTIL ?
A: We were a business house pitted against the mighty and unholy alliance of rogue regulators, co-opted bureaucrats and the wrath of UPA-era Finance Minister P. Chdambaram, which collectively has been described as “C Company”. This group has sought to wreck every new idea that was not operating in its interest. In our case, a former Finance Minister P. Chidambaram, former Chairman of Forward Markets Commission and the then Additional Secretary, Capital & Commodities Markets, flouted every protocol and convention in crippling a thriving and fast expanding business house. The Supreme Court verdict quashing the forced merger order of MCA thus came in the form of God’s signature. Despite all the trouble, certain elements in the official machinery gave our company; the reason why it is still breathing is due to the power of law of the land of this country as protected by the Supreme Court.

Q: How do you see the five years after your exit from the exchange industry?
A: I belonged to that tradition where exchanges are meant to expand business, give more opportunities to intermediaries and add to jobs and incomes. The premise on which we operated MCX till 2013 has led to a “Million Jobs and a Million More Opportunities” as the study with the Tata Institute of Social Sciences (TISS) established. We were igniting the markets with new products, creating capacity and growing them. There is a trend now for product launches with hype and fanfare to catch headlines, but which soon afterwards are not heard or seen afterwards. Much of the effort of today’s players is eating into the existing cake rather than expanding it or creating a new one.

Q: Is there a long tradition of trading in India?
A: The power and prowess of India in trading capabilities is detailed in my book “Roots of Commodity Trading in India” which traces it to 6th century BC. In the world, China and India are known for trading. While China caught up post its liberalisation, India still lags behind. Even exchange trading volumes in India are far lesser than in China, though the latter was a late entrant in derivatives market. For instance, China’s Dalian Comex alone clocked 1.4 billion contracts in 2019 in commodities derivatives compared to 306 million contracts at MCX. When we operated it, MCX was ahead of Dalian by 300 million contracts in 2012. Prime Minister Narendra Modi needs to ensure a strong and conducive environment to unleash the great potential that it has in trading since millennia.

Q: How can India be a global player in metals and energy derivatives trading ?
A: Every new path that was embarked on, be it trading of gold, silver and natural gas in MCX or currency derivatives in MCX-SX, or electricity in Indian energy exchange, were derided by competitors, but we were able to defy their gloomy forecasts within a short time. Many “experts” warned that currency futures won’t cross Rs 1,000 crore turnover ever, but we showed how to take this figure to more than a $10 billion in less than two years. India has great potential in exchange development which is the reason why we took India-owned exchanges to be set up in major international financial centers. The idea was to connect Indian players with our own exchanges in global centers which unfortunately was thwarted by competitive forces close to the “C-Company”. What we were denied then is now merrily defied by players outside of India and there seems no other option than for the decision-makers to cut a sorry figure.

Q: What is needed to ensure a fair fight against competitors?
A: The essence of public markets is to help players with all kinds of support and enable investors a fair ground to engage in. Right from the practice of doing away with halt in trading due to Sun Outage to early credit of proceeds to brokers’ accounts to affordable education in financial markets practice to under-privileged, to special training to rural entrepreneurs, our approach was that of public markets for a public purpose. Too many powerful players have as their main business model profits based on shallow products in a narrow market whereas what is needed is democratisation of markets. We proved that it can be made successful.

Q: What is the current state of markets?
A: Indian markets are not as strong and robust as they should have been. Indian markets were first set up to channelise investments. However, because of continuous erosion, the state of markets has deteriorated from investment to trading to speculation (satta) and now many warn it is becoming a gambling (matka) market. We have started measuring the success of markets by level of index and illusionary volumes that have been generated on market platforms by calculating value-based on option, on strike price than the premium value in money terms. Such calculations are totally misleading in judging turnover. A worrying part is the practice of gauging the robustness of markets through market turnover instead of the depth and liquidity of the markets.

Q: How do we generate a productive generation of entrepreneurs?
A: In any generation, the purpose of any enterprise is to create a strong balance sheet, create a wide product base and a robust shareholder value. Mere sound and noise without these qualities is nothing, but trappings very doubtful to stay in the long term. An entrepreneur should never lose focus on the strength of the balance sheet and the purpose of business.

Q: How did you survive the assault of the “C-Company”?
A: You can kill an enterprise by conspiracy, but you cannot kill the spirit of an entrepreneur. My colleagues and I still receive warm messages from well-wishers hoping to see me in action again. But the top priority is to clear all the legal tangles which we are doing one by one. Hopefully, the day is not very far off when yet another contribution to jobs and to establishing India as a global exchange hub will be made.

Q: What are the emerging technologies in financial markets?
A: A wave of new technologies from Artificial Intelligence to Cryptos are knocking the financial industry the world over and shaking it up in a big way. It is not just regulation and players, but policy and people at large who should be educated on these aspects. Every new technology could provide undue advantage to favoured players in the short term. In the interests of a market that is fair to all rather than biased in favour of a few, such situations need to be put in watch and check. Unfortunately, even matters as weighty and as damaging to the integrity of markets as co-location have been swept under the carpet even by regulators.

Q: What are the aspirations for the future?
A: ODIN, MCX, IEX, MCX SX and other global exchanges such as DGCX, SMX, BFX, GBOT and BA owned by India surely stand out as distinctions. NSEL is a regret where I did not have a direct role, but that was forced upon me. Nevertheless, eager to see early resolution of all claims, though personally the damage done to me is beyond repair. Aspiration is to see 63 Moons once again dominating the technology and innovation space which it was known for.

Q: Can India once again regain past glory?
A: India was often undermined from within. We experienced how a handful could cripple a successful business house that was winning laurels from all over the world. But India has also the exceptional quality of getting even with every adversary and adversity in making its strides forward.
Before 400 years, India was the Sone ki Chidiya in terms of international trade and commerce. Even now, if we focus on our historic significance for trade and economy, India has full potential to become the international trade center between Tokyo and London with its huge internal economy and consumption. As a result, the per capita income of India can grow from the current level of $2,000 to that of the advanced countries in a generation. I remain an optimist that India will move on and progress.

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