Revival plan to mark USE AGM

Privately held United Stock Exchange (USE), whose market share of the currency derivatives segment dropped from 52.05% at the time of its birth in September 2010 to less than 1% now, is set to announce a revival plan to its shareholders during its annual general meeting today.

The Mumbai-based exchange’s plan will include introduction of new products and a strategic focus on garnering open interest rather than volumes, according to Saurabh Sarkar, USE’s MD and CEO.

“Our objective is to gain a 10% market share in currencies to start with. We will focus on other products including interest rate futures,” he said. (Interest rate futures are used to guard against adverse movements in interest rates. They are used by those affected by interest rates, like corporates and even individuals.)

Sarkar declined to share further details on planned innovations as they need to be presented to the regulator first.

But the USE has already begun to charge lower transaction fees compared to the MCX-SX and NSE.

“This time we want to do it a little differently. We don’t want to rush to achieve very large volumes. We are focusing on liquidity as well as open interest. (Open interest indicates derivative positions still open at the end of the day and is a measure of liquidity.) We are talking to our shareholders, including banks and corporate entities, as well as large market makers to achieve this,” he said.

This strategy comes as volumes remain volatile but with a downward bias. T S Narayanasami, USE’s founding MD and CEO, resigned in October 2011. In March this year, income tax officials probed the exchange, but details are sketchy. Also, market regulator Sebi pulled up the exchange in May after one of its shareholders, Jaypee Capital Services, was found to contribute up to 80% of its volumes. (Jaypee remains a shareholder and a member of the USE.)

Sarkar assumed office on July 25 with the express mandate to arrest and reverse the USE’s descent. He told DNA Money that there is no pending tax inquiry against the exchange. “We have a very active surveillance mechanism in place. So no member will have a disproportionately high share of the volumes,” he said.

The USE’s shareholders include 21 public sector banks, six private sector banks, three corporate entities, one foreign bank and the BSE.