But unanimity on STT reduction
The meeting between finance minister P Chidambaram and top officials of the four stock exchanges on Saturday saw extensive discussions on issues such as securities transaction tax, trade timing and the flash crash.
Sources said while there was unanimity between the exchanges for a reduction in the securities transaction tax (STT), opinion was divided on extending the trade timings, especially for the exchange-traded currency derivatives segment. ?Everyone agreed that the cost of transaction in India is high and, so, something needs to be done to attract more investors,? said a source on conditions of anonymity. ?Market participants have for long been demanding a reduction in STT and the same was conveyed to the minister.?
The sensitive matter of trade timing was also discussed in the meeting, which was attended by officials of the NSE, MCX-SX, United Stock Exchange (USE) and the BSE. Sources said that exchanges apprised the FM of the difficulties faced by exporters and other small and medium enterprises with regards to forex hedging and the need to extend the trade timings for currency derivatives segment till late evening.
?Data suggest that once the Indian market shuts at 4pm, the trades shift to geographies like Singapore and Dubai,? said a person privy to the discussion. ?The FM was told that the timing of the exchange-traded currency derivatives segment should be extended to stop this export of forex trades,? he added.
Market players say that in the absence of an alternative in India, currency trading is shifting off-shore, namely Dubai Gold & Commodity Exchange (DGCX) and Singapore NDF (non deliverable forwards) markets. They say these markets see huge surge in volume post 5pm IST. Globally, NDF markets are believed to be around 10 – 20 times of exchange-traded markets.
It is believed that some of the leading exporters are planning to soon meet officials of the Reserve Bank of India (RBI) to convince the banking watchdog to extend the trade timings for currency derivatives. The exchange-traded currency derivatives segment is regulated by a joint technical committee of RBI and Sebi.
