Big money and players will come only when sophisticated products are available for trading. “The Indian markets need more over the counter (OTC) derivative products to attract big players and big money. The participatory note (PN) is an OTC product (where trades are done directly between two parties). But our systems and intermediaries should be prepared and big players should be allowed to enter,” said a market source.

Opined Prakash Subramanian KV, managing director and regional head, South Asia (capital markets), of Standard Chartered Bank, “They are opening up these segments in a phased manner after studying the full implications in the marketplace and do not want institutions to get into these products without understanding the associated risks.”

For example, the RBI had recently come with the draft guidelines on credit derivatives and obtained feedback from market participants. They are also planning to initially allow only banks and PDs to trade in this instrument. However, once the market stabilises and systems are in place, they will probably allow other participants like insurance companies, MFs and overseas investors like FIIs and hedge funds to participate.

Experts say that Mumbai can become an international financial centre only when these markets are properly developed. Not only that, big money and players will enter India only when such facilities are available, making the financial markets stronger and deeper.

The BCD Nexus

• Bond market yet to be developed properly

• Currency futures yet to begin; draft norms out

• Credit derivative norms also out; trading yet to begin

... contd.