MSCI calls stock exchange data restriction anti-competitive
MUMBAI: Global index provider MSCI Inc. said it considers the move by Indian stock exchanges to restrict data feeds as anti-competitive and the move could hurt India weightage and the country’s asset classification in its indices.
“The breadth of the restrictions imposed by Indian exchanges is unprecedented in any equity market in the MSCI Emerging Market Series,” the company said in a statement issued late on Thursday night.
“MSCI strongly suggests the Indian exchanges and their regulator Securities and Exchange Board of India (Sebi) reconsider this unprecedented and anticompetitive action before it leads to any unnecessary disruptions in trading or a potential change in the market classification of the Indian market in the MSCI Indexes,” it added.
India’s top two stock exchanges—National Stock Exchange of India Ltd (NSE) and BSE Ltd—on February 9 terminated agreements that allowed their index derivatives being traded on overseas bourses and data vendors from providing data to entities that will use it to trade on overseas exchanges.
This holds true for MSCI too, if any of its indices gives more than 25% weightage to Indian securities. MSCI Emerging Markets Index has given 8.4% weightage to India behind China, Korea and Taiwan.
Most of the international interest in India, and inflows, comes because of this weightage. MSCI India Index has over $9.2 billion in total assets under management for MSCI India family exchange traded funds (ETFs).
A derivatives trader said on the condition of anonymity that while foreign investors look at ease of trading, they cannot afford to completely overlook India. “India equities have been growing consistently notwithstanding the current volatility. So we might have to wait on whether MSCI purely reviews the weightage on basis of ease or also looks at the broader market,” he said.
MSCI conducts two reviews in a year and the first review is due in June.
A senior fund manager on condition of anonymity said that ETF funds do track MSCI weightage and accordingly allocate investment capital into countries.
“But I do not think MSCI will downgrade weightage due to this specific reason because fundamentally nothing has changed except exchanges are not providing data. If MSCI downgrades India’s weightage, its own existence in the country will be at stake. We need to watch out how far this murky fight between exchanges go,” he said.
While an email sent to an NSE spokesperson was not answered, BSE declined to comment. Meanwhile, a person familiar with matters in the Indian stock exchanges said, on condition of anonymity, that they have had discussions with MSCI in the past week.
“We have had conversations with MSCI and we have assured them on our thought process. This won’t impact MSCI Emerging Markets, which carries a 9% weightage to India, as it is too broad to lead to any meaningful decisions by investors,” he said.
A second person familiar with the Indian bourses’ thinking says that the idea is not to restrict market access as MSCI has presumed.
“Any overseas exchange does not provide live feed of their data to rival exchanges. But some foreign counterparts and MSCI essentially wants Indian exchanges to provide it. The entire point of the exercise is to consolidate liquidity,” he said.