MSCI eyes block deals for revival

The Metropolitan Stock Exchange of India (MSEI) plans to woo brokerages to execute large stock trades on its venue, as a new management team tries to breathe life into a bourse that has floundered for a decade.

Backed by billionaires Rakesh Jhunjhunwala and Radhakishan Damani, MSEI aims to wade into the block deals segment, which is worth as much as ~5 lakh crore ($78 billion), according to Chief Executive Udai Kumar. India's regulator defines a block as a single trade having at least 500,000 shares or a minimum value of ~5 crore. Money managers like dealing in large sizes because it ensures transactions are done before the market can hear about them and react by raising or lowering prices.

“We are telling institutional investors to come to our platform — there will be no slippages or price impact,” said Kumar, who was named chief executive officer last year to turn around the bourse. The MSEI is in talks with half a dozen large investment banks to bring in such deals, he said. That’s easier said than done. Despite starting in 2008, MSEI has failed to seriously threaten its rivals. It had a 4.3 per cent share of currency derivatives at the end of March, and barely exists in India’s $2 trillion equity market, which is dominated by the National Stock Exchange of India and BSE.

The company has struggled to make a mark since a payment default in 2013 at a related exchange forced the original founders to sell. A clutch of financial institutions now own more than 34 per cent of MSEI, as do investors including Jhunjhunwala, Damani and Nemish Shah, according to bourse’s website.

Efforts are being made to fix the “erosion of trust” through investor education initiatives, broker events and media campaigns, Kumar said.

The exchange is also developing short-term debt instruments to help mutual funds and insurance companies hedge their portfolios, Kumar said in an interview at his office in Mumbai, without providing details.

The company has struggled to make a mark since a payment default in 2013 at a related exchange forced the original founders to sell