Securities 1

INDIAN SECURITIES MARKETS - NEW BENCH MARKS G.N.BAJPAI1 The Securities and Exchange Board of India (SEBI) is indeed happy joining hands with the Federation of Chamber of Commerce and Industry (FICCI) in organizing this two day seminar on the theme, “Ind ian Securities Market – New Benchmarks”. Let me begin by welcoming all the participants and in particular our distinguished guests … The timing of the seminar could not have been more opportune. Globally, Securities Markets are emerging out of a prolonged phase of suspended animation (of bulls) drugged by the overdose of technology stock meltdown and series of wide spread market misconducts across nations including those of the Indian sub-continent. Unusual and fast paced rise and fall in the valuations in the securities market are occasions for introspection – in retrospect and prospect by the Regulators – primary and ultimate, as also macro and micro industry associations. Such events are conceived on concepts – investment themes, reared in the womb of rumors and nourished in the cradle of volumes. Irrationality deserves to be probed to ensure that the axe of the dump does not fall on the fortunes of the innocent investing community and eventually hurt the economic order. Significance of Securities Market : I am strongly of the view that vibrant securities are an amazing vehicle for disseminating opportunities and mitigating economic deprivation. The market’s ability of providing convenient financing clothing to human ingenuity facilitates the development of “creative destruction” whereby archaic; time cycle for modern to be archaic has contracted beyond anticipation, and decayed philosophies and perspectives are challenged by more relevant thought processes and inventions. Let me quote my friend, Mr. Raghuram Rajan and his co-author Luigi Zingales from their latest book, “Saving Capitalism from the Capitalists”. “In the United States, constant financial innovation creates devices to channel risk capital to people with daring ideas.” I share their assessment that one of the significant causes for the economic retardation of the euphemistically described third world economies is the absence of a securities market or a primitive securities market because finance in an under developed system tends to be unprogressive and hidebound which eventually blocks harnessing potentials of economies of scale and opportunities of scope. Changing Ethos : Financial Markets, across the globe, are undergoing profound, unprecedented and fast-paced changes. Technology has revolutionized the processes and the information explosion has sparked off remarkable changes in the way the world has been operating. 1

Speech delivered by Shri. G.N.Bajpai at the SEBI-FICCI Convention On Capital Markets, Mumbai on August 6, 2003 ,at Oberoi Towers

Though organizations, their competencies and product portfolios are expanding and going global, their profit margins are shrinking, competition is intensifying and lives – working and social, are becoming more and more complex and tougher day by day. Opportunity zones are encountering a blood bath, globally. Change has become a ubiquitous phenomenon. Indeed, the intensity and speed of changes in the market place is rendering all veterans, conventional and orthodox organizations and people redundant at an amazing speed. Unambiguously, markets have become merciless without any respect for the long standing and accumulated expertise. Amidst such choppy waves, market participants are virtually left with two choices – either change or perish. Apparently, nothing but change is stable in the world, which interestingly offers both - opportunities and challenges. To me, change is an exciting opportunity to reposition oneself because of the survival crisis created by unanticipated change and/or the excitement offered by the unfolding of new caverns of opportunities, which were not visible earlier to the naked eye. It would not be inappropriate to conclude that the future looks non- linear, discontinuous and unpredictable and what matters most today is the capability to deal with the future. Thus, the future is all about imagination and new creations. Are we missing the procession of emerging opportunities; or mortgaging our future at the altar of survival….., which, I am sure, successful organizations and people cannot afford to do. Therefore, it has become imperative to weave clear cut strategies to strengthen each link in the value chain to deal with these changing dimensions of the business landscape. Changes in the Indian Securities Market : The Indian securities market is in transition. There have been revolutionary changes over a period of time. As everyone sitting here is aware of them, I do not wish to bore you with details. In fact, on almost all the operational and systemic risk management parameters, settlement system, disclosures, accounting standards, the Indian Securities Market is at par with the global standards. Indeed, on a few paradigms, it is ahead of the global benchmarks. Some of those initiatives are: • • • • • •

T+2 settlement cycle. On line monitoring of positions and margins and automatic disablement of terminals. Corporate governance index as a measure of wealth creation, management and distribution. Establishment of CLA. Central counterparty. Commencement of Straight Through Processing

The list is large, but, better leave that here and focus on “what next”. “What next” these two words and eight characters arouse extreme interest. The Road Ahead : As mentioned earlier, the “Road Ahead” is all about imagination. Let me share what I visualize of the future structure of the Global Securities Markets in general and of the Indian Securities Market, in particular. I would also touch upon the possible repositioning of the various segments and their participants. Interestingly, I am conscious that even this imagination may undergo whole scale reorientation. A clear and candid disclaimer – this is the imagination of a prose writer (I have never been a poet) and not that of the Chairman, SEBI who is a statutorily christened pontiff authorized to develop and regulate the securities market of India. I would like to divide the talk into the following sections and would address them one by one. • • • • • • • • •

Future structure of the trading platforms Future structure of the Clearing and Settlement mechanism Future structure of the Intermediaries in the market Future structure of the Financial Products Role of organizations like Credit Rating Agencies Tomorrow’s investors Tomorrow’s issuers Tomorrow’s professionals Future structure of the Regulatory Regime

Future structure of the trading platforms : The focus of a lot of work in the financial Markets is on making them more transparent, competitive, efficient, efficacious and cost effective. My sense is that a lot of that can be infused in the Market by the simple act of bringing more and more financial products to the electronic trading platforms provided by the Securities Markets. Discussions on competitive advantages and disadvantages of over the Counter (OTC) trading and the exchange driven environment have by and large settled down. Global Markets agree, undisputedly, that though both the markets complement each other and serve specific set of market participants, an exchange driven environment offers better values in terms of price discovery, transparency and competitiveness. With this thinking crystallizing, more and more products are joining the trading platforms. Evidences from across the globe are live. Who would have thought a couple of years ago about power, weather, catastrophe, hailstorm, temperature, electricity, credit risk being traded on the exchanges but, that is all a reality today…… I see enormous potential in many more products coming to the trading platforms of the exchanges. Therefore, I see the expansion of the exchange traded products an everlasting phenomenon… because ethos will be of providing solutions to even unimagined and unanticipated problems.

I see one more dramatic development taking shape on the exchanges and that is the capability of directly mapping the ultimate investors. It essentially means disintermediation i.e. investors bypassing the brokers. Tomorrow’s investors may be able to log on and execute their trades themselves and systems would be potent enough to check the availability of funds or securities in their bank or DP account before execution of orders. And, that may be possible through mobile phones, internet, ATM machines and what not… The system would lock in funds or the securities before the trade actually goes through. I would also imagine that a reverse transaction would unlock the said funds or securities and create room for further trading by the investors. This would be a paradigm shift in the market structure, which would spark off radical changes in the market place, especially for the broking community. I would come back to this point when I talk about the future shape of the Intermediaries in the market. As the exchanges are in the business of providing liquidity to the market place through a transparent and efficient mechanism called the trading platform, like any other business their success or failure would be determined by the competencies they possess and strategies they adopt to position themselves in the future. I see the integration / amalgamation / mergers of the entities (exchanges) and businesses into liquidity business on the lines of other opportunity zones. Indeed, this has already begun if you incisively survey around. Creation of the Euronext (merger of Amsterdam Stock Exchange, Paris Stock Exchange and Brussels Stock Exchange), Singapore Exchange Ltd. (merger of Stock Exchange Singapore and Singapore Mercantile Exchange (SIMEX)) and OneChicago (alliance of Chicago Mercantile Exchange (CME), Chicago Board of trade (CBOT) and Chicago Board Options Exchange (CBOE)) are live examples to substantiate the underlying thinking. Further, London International Financial Futures and Options Exchange (LIFFE) has also joined hands with Euronext to create Euronext.liffe. Let me hasten to add, as of now I am of the view India needs at least 2-3 exchanges to serve the continental structure of the market and fight the challenges of building a competitive edge. However, eventually there would not be more than say 5-6 stock exchanges across the globe, in the time to come. Which five-six, I don’t know! That would depend on the strategic global moves that existing exchanges across the globe take as they all are competing for the future opportunity share in a very competitive environment. Further, my feeling is that these exchanges would simply be exchanges and not securities exchanges as they would trade commodities, securities, currencies, bullion, weather, credit risk or anything else you can imagine and beyond. Therefore, what I am saying is that fragmentation of the liquidity in an asset through its trading at different exchanges or different exchanges for different underlying assets would become an obsolete phenomenon, across the globe. It is logical because creation of a trading platform is an onerous job and demands huge monetary stakes. Further, if both the commitment of the large amount of fresh resources or the incremental cost on the augmentation of the capabilities of the existing trading platforms is going to create similar values, augmentation will definitely be a better choice. It would be like

expansion of a shop in terms of more product lines and more brands of the existing product lines. This phenomenon is also envisaged from the perspective of the enormously better values to the investors, the clients on this shop (exchange), in terms of the economies of scale (trade discounts), convenience (ease), economic use of the risk capital (facility of cross margining across the positions) etc. It would be like shopping from a big mall, which serve customers with A to Z of their requirements. This is, undisputedly, a significant competitive advantage from the market’s perspective. Further, with corporatization and demutalization of the exchanges across the globe there is a clear difference in the way these exchanges are looked at. You would not be surprised if tomorrow BSE gets listed on the BSE and / or at some other exchanges across the globe. For your information, Australian Stock Exchange, London Stock Exchange, Hong Kong Stock Exchange, Singapore and Stockholm are listed on themselves. Segregation of the ownership and trading rights on exchanges is a major move from the perspective of bringing in professionalism and credibility to the market place (exchanges). My feeling is that this phenomenon would continue to strengthen in the future… Future structure of the Clearing and settlement mechanism : As mentioned above, today, at the global level, trading is being commoditized and energies of the policy makers are concentrated on the clearing and settlement function. All of us would agree that having traded on an exchange platform what matters to the parties ultimately is the settlement of the transactions. Therefore, clearing and settlement functions are unequivocally a crucial link in the whole value chain. Until some time ago, exchanges had separate clearing corporations / houses. This practice is no longer prevalent. Today, a single clearing corporation serves the clients (investors) across the exchanges and beyond that hunts for opportunities even outside the exchanges. Look at Options Clearing Corporation (OCC) in the U.S., which serves across exchanges (CBOE, Philadelphia and American Stock Exchanges) and Over-the-counter transactions simultaneously. That was an unbelievable phenomenon a little while ago. Similarly, London Clearing House offers a product called “Swapclear”, which is all about providing the clearing and settlement function to the parties in a swap deal. Do n’t you think it is all different ..… significantly different? On the horizon, I see a global revolution on the clearing and settlement function. Tomorrow’s clearing corporations would operate at the planetary level managing risks across economies, markets, segments and what not. Further, I would argue that the speed with which the economies and markets across the globe are integrating, there may be a need only for a couple of clearing corporations to serve the entire world. The merger of the two major clearing corporations at the global level, Cedel International and Deutsche bourse clearing corporations to form Clearstream validates this thinking. Of course, I would imagine these organizations to be very competitive and focused on delivering world class risk management solutions to their customers across the globe.

As a strategic move, I would say that these new generation clearing corporations would reposition themselves as “Risk Managers at the Global Level” and that would lead to the emergence of a whole new concept - Risk Management Outsourcing (RMOs) organizations on the lines of the now popular Business Process Outsourcing (BPOs) outlets. Indeed, I would stretch my imagination and say that tomorrow these crazy clearing corporations (risk managers) may compete even with traditional bankers on the credit guarantee front. What I am saying is that I would not be surprised, if an entity approaches a clearing corporation rather than a bank for trade guarantee tomorrow which may eventually happen as these new age clearing corporations would become risk managers exploring the opportunities for risk management across sectors, relentlessly. Don’t you think that a bank guarantee is a risk management function? In the changing paradigm, the competitive pressures in the market would demand these clearing corporations to go for an independent rating – both professional and credit. I think, I am talking about something very unconventional but, believe me, that is likely to happen. The issue is not whether but when? I am envisaging the credit rating of clearing corporations as a means to establish their credibility amongst the market participants, who (clients of the clearing corporation) are exposed to its risk. My feeling is that credit rating by an independent professional agency would help them stand firmly on their own feet. Future structure of the Intermediaries in the market : Now, I will come back to the point I was mentioning while talking about the possible changes in the structure of the trading pla tforms. The point was the capability of the exchanges to map investors (customers) direct, without any intermediation, through leveraging of the technology, which would put bank and DP accounts of a client on line. Don’t you see that this transformation in the business model would call for some radical repositioning at the end of broking agencies? I think, it would. Let me share with you how…. First I envisage that even in that kind of environment broking would have a role to play. We need to appreciate that in that scenario, brokers would be serving the people who are basically traders or are trading on the margins i.e. without securities or funds in their respective accounts. Further, on the derivatives side, where positions remain open for long on margins, market participants would definitely need brokers. This would result in two business models in the market – a delivery-based business model, where clients deal direct with the exchanges and a non-delivery-based business model, where clients trade on ma rgins through brokers. I would acknowledge that the opportunity zone of the second model viz., non-delivery-based business would always be bigger than that of first. In that scenario, I think, brokers would need to redefine their competencies, skills set and deliveries. To tap a part of the values from delivery based business, they would

need to position themselves as consultants or advisors to the clients as their role on the execution of the trades would come down drastically. Then, what is called add-on services (research based advisory) today would become the prime piece to be served to the investors. Further, for non delivery business, they would need to build up fresh competencies to deal with the rocket science called derivatives. Don’t you think that a sizable change is taking place in the broking business? If you don’t, get up and start looking at it please… Further, my feeling is that markets across the globe would shift to the clearing and trading member concept. Beyond this, these members wo uld possess global competencies, thinking and perspective and explore opportunities across segments at the global level. It goes without saying that on the lines of the shrinking numbers of trading platforms and clearing agencies, the world would witness a similar phenomenon on the clearing and trading members’ level. I would imagine that there would be only a few clearing members and a large number of trading members in that kind of environment. Further, as I talked in the case of clearing corporations, clearing members and trading members would go for rating, both professional and credit. In addition to this, they would need to innovate relentlessly without any complacency. Value delivery alone will facilitate rejuvenation for longer life. Future structure of the Financial Products : As discussed before, technology is helping market players redefine the way they have been operating in the market. To take an example from banking, today, banks are taking ATM machines to the customers – indeed a noble concept. Availability of concepts like phone banking, anytime banking etc. has been possible because of technological advancements. With increasing complexities of the business environment, the world would need more complex financial products as a strategic solution to the specific situations. My feeling is that financial innovation would become as ubiquitous a phenomenon as quality control and customer care. Availability of financial products linked to the temperature, earthquake, snow fall, rain fall, hailstorm and what not communicates that there is a huge room for creativity and imagination in this area. Today, anything and everything is being traded in the market. The emergence of areas like credit derivatives, real options, securitization is paving an entirely fresh set of opportunities for the market place. Securitization of any kind of receivables including inventory (champagne bonds) to album royalties (Bowie Bonds) is a remarkable accomplishment. A tremendous amount of creativity and imagination is at work in these markets and financial innovation is going to be one of the most happening things in the world. There is a huge room for structured and synthetic products even in the Indian Market. To me it appears, the market is in for an exciting phase, in terms of the financial innovations.

I believe, we need to explore new frontiers in the field of finance by going beyond the known parameters and then only we can discover fundamentally distinguished and great financial products. In my opinion, this calls for dedicated efforts on the subject and so there is an urgent need for an institution say “Center for Financial Innovations” in the country. My thinking is that this center may become the hub for the global market participants through its distinguished strategic resources in terms of the core competencies of the intellects and the low cost structure. This center would have the potential of emerging as the source of knowledge and innovation across the globe. I would summarize this topic of financial innovation by saying that “To lead, one needs to be different and to be different one needs to innovate strategically on a persistent basis”. Only differentiation can help someone redefine the basis of competition and emerge as a leader. Therefore, I would urge market participants to innovate relentlessly to lead in the market. Role of organizations like Credit Rating Companies : At a number of places during my talk, I have mentioned about the rating by independent professionals viz Credit Rating Companies. And they would rate every character – on the stage and off the stage of the drama in the securities markets - even the regulators and the credit rating agencies themselves. I would like to clarify that I am not promoting business opportunities for the Credit Rating Agencies (CRAs) in any manner. The only interest I have is regulatory responsibilities. It is just the way I see the businesses taking shape and credit and professional ratings becoming more and more important. My feeling is that ratings would be used as a strategic selling point by the market participants, tomorrow. And, interestingly, this all would be voluntary as markets would be driving this phenomenon across the globe. I would like to mention here that there comes a bigger responsibility for the Rating Agencies, globally. Today, at the international level questions are being raised about the credibility of the Credit Rating Agencies (CRAs) themselves. Debates go on and on without any conclusion. I think that CRAs need to be more transparent, logical and pro-active in their approach to the rating. They have a huge task of, I would say, reestablishing their credibility in the global markets. They need to honor their residual responsibility with abundant caution and care. They need to focus on their rating migration indices as a proof of their performance and delivery to the market beyond expectations consistently. Tomorrow’s investors : Tomorrow, investors would be perceived as not just investors but as buyers of financial solutions. Hence, the philosophy of the customer being king would drive the Securities Market as well. Accordingly, no more customers will chase products; but products would be chasing the customers. Tomorrow, financial institutions would codesign products / services with their customers and strive to provide them with global solutions. Simplification of the customers’ life would be priced by the market. Look at

what some International Banks are doing by providing all the services to their customers from checking account to savings account to housing loan to car loan to credit card and what not…with a single bank account; they are simplifying their customers’ lives. I think, it is pretty interesting. Tomorrow, investors would be more educated, informed and take their decisions based on the fundamentals of the issues. The concept of the hard mentality would evaporate from the globe. Tomorrow, investors would be aware of their rights and participate in the decision making process, wherever they have stakes. Further, their awareness coupled with radical initiatives by the policy makers would result in the reduction of the market misconducts, which has become the cause of concern for the economies globally. Tomorrow’s Issuers : Some recent market misconducts have shaken the confidence of the market participants significantly. Damages are beyond imagination and appear irreparable. But, lessons learnt from these incidents are critical. Corporates should have realized that the only way to sustain and grow is through winning the confidence of the stakeholders and to win their confidence they need to be more transparent in their approach. In this age of information explosion they cannot afford to do something fishy and keep that under the carpet. Therefore, my feeling is that tomorrow’s regime would be purely a disclosuresoriented regime; every bit of information flowing to the stakeholders’ domain. Accounting standards would become more stringent and transparency-oriented. Here, I would like to mention that as organizations are becoming more and more global in terms of their operations and resource raising, there is a need for evolving “Global Accounting Standards” i.e. universal accounting standards across the globe. This may appear laughable and ridiculous but that is the way the globe is going to go in the times to come. If it does not happen, a fragmented approach to accounting and disclosure requirements in different countries would become one of the biggest impediments on the path of global integration. I would also say, tomorrow’s organization would also be more law-abiding, more ethical in their approach and follow good corporate governance practices. This would emerge from the enormous external pressure of the stakeholders. Leadership is also being redefined across the globe and what would be critical in the long run is the ethics in the business and dealings. I would convey to the Indian corporates to do fewer things but do them better than the best, globally. We need to appreciate that no one can int ernalize the versatility of competencies. Hence, it would be imperative for tomorrow’s leaders to leverage, outsource, network and create strategic alliances with others. Further, we need to think without precedents as precedents create the risk of limited thinking by withholding the imagination from running radical to develop fundamentally great and different products and services. Therefore, be different faster than being better and be better faster than

being leaner. We need to go beyond known path-breakers and secure a place at the international atrium.

paradigms

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Therefore, we all need to strategize to position “India Incorporated” at the Global level. We need to come out of the thinking of being a developing country because ‘developing’ is a mindset. There are areas where India is globally competitive. Our biggest strength is the educated, trained and skilled manpower – the scientific minds. We have proved that by the exhibition of resilience of the Indian economy even in the midst of global meltdown steaming nonchalantly out of the collapse of far eastern economies and troubled Latin American setting. We need to focus on our strengths and identify the weak links in the chain and dent them with determination. We have the entrepreneurial acumen to paint India as a giant figure on the global canvas. I strongly believe, we have the potential to do so and we can do it. A perception is steadily growing about India being a dynamic market among the international community. Tomorrow’s professionals : The changing paradigms of the business environment provide professionals with only two choices – either change or perish. The choice of either of these two alternatives lies with individual professionals. Gone are the days of employment security through lifetime employments. Now, we all need to be comfortable with the word called “insecurity” in our profession. Accordingly, the focus of professionals needs to be on emerging opportunities, competence building, strategies for the leadership position in those opportunity zones and principles-centered business practices. It must be clear that these professionals would derive values from their value delivering capabilities. Interestingly, today, there is a competition for competence in the market. Fortunately or unfortunately, the success or failure of a professional, in this battle for competence determines his potential for growth and competitive differentiation. Professionals need to strategize and re-strategize almost on a continuous basis. They need to persistently strengthen their existing knowledge and acquire/create new knowledge, compatible with the existing one, as quickly and as inexpensively as possible, to continue leading in the opportunity zones. They need to develop the capability to learn, unlearn and relearn on a persistent basis. Today, professionals are competing for space in crowded markets. The competitive position of professionals in the market place would depend on the speed with which they run on the learning curve, discover new frontiers of knowledge in all dimensions of their operations and then think creatively and imaginatively on the strategic ways to transform this accumulated knowledge into a value delivering proposition. It should be understood that the existence of knowledge does not ensure success; Professionals must also possess the capabilities to leverage on that knowledge to create values. In this increasingly competitive and complicated business environment, it is imperative for professionals to primarily focus on value creation through a continuous

improvement in their competence levels. They also need to cultivate and nurture leadership and ethical practices. Only an appropriate mix of competence, leadership and ethical practices would ensure the long term growth of individuals, add value to their contribution, keep them relevant to the emerging ethos. Obsolescence, out of time and tune, is the gravest of risks and the only insurance against getting buried in the debris of obsolescence is “constant upgradation of skills relevant to the time and tune”. The recurring financial crises and the scams that rocked the world in the recent past were the products of weak and meek professionalism. I believe, competence was never in paucity, but ethics was. The said crises have called for a sharper focus on ethics in the professions. That is the reason, I strongly believe, today, professionals with outstanding business acumen, leadership and ethical bent of mind are required across the globe. The time has come for professionals to demonstrate extraordinarily high standards of leadership and integrity. I have a strong conviction that tomorrow’s successful leaders would value principles more than the companies they work for. Future structure of the Regulatory Regime : The foregoing propels the feeling that markets, across the globe, are being redefined, reinvented and reconfigured on a persistent basis. Unquestionably, Regulations need to keep pace with the dynamically changing business environment because Regulators cannot deal with the complexities of the new age business environment with archaic rules, regulations and a rudimentary perspective. It would be like shooting a moving target with a static gun position. Therefore, in this era of revolution across the globe, regulations need to be enterprising, forward looking and evolutionary in nature. My feeling is that tomorrow the Regulators’ focus would shift dramatically from regulations to the Development of the Markets. In my view, Regulations just happen to be incidental to the developmental process. This change in the regulators’ focus would bring in a paradigm shift in their approach, which would facilitate their transition from being enforcement-oriented, reactive, adversarial, incident driven and hard to compliance, to being partnership-oriented, preventive, problem solving and soft. Tomorrow, Regulations would simply define the broad framework / parameters for the game and within that framework; market participants would be allowed to operate without any intervention. This approach is all about having confidence in the market and systems. Now, the challenge would be to ensure that the people don’t play foul with the game. Protection of the system’s integrity through architecting a proper risk management system would be another challenge before the regulators. This would demand regulators to make tactical choices with regard to the tools, best time intervention and regulatory style to fit the audience. Another significant challenge to the securities market regulators across the globe is posed by the convergences of the opportunity zones. Traditionally, businesses were clearly differentiated; Banks conducted banking, insurance companies offered risk covers and securities companies offered investment opportunities. This resulted in separation of

supervisory structures along business lines. But, today, those traditional business models have become the footnotes of finance literature because as mentioned before, stock exchanges may become simply exchanges trading anything and eve rything and not just securities; similarly, securities brokers may become just brokers exploring opportunities across the different dimensions of the economy. On similar lines, institutions in finance are talking about a one-stop shop offering all the products ranging from commodities to securities to currencies and an opportunity for profit in a cavern in the moon under one roof. This change in business models is necessitated by the values buried in the opportunities from economies of scale and economies of scope. Though it makes economic sense to create a one-stop shop for customers, there is a critical issue of risk of one activity spilling over to the other segments of the financial markets. Now, as the regulators are different for different activities, there is a potential problem of shifting responsibilities among the regulators, at times of crisis. Therefore, this emergence of new age one stop financial institutions has resulted in a titanic challenge to the regulators, internationally. They need to co-operate at a level more than ever before. Creation of the Financial Services Authority by merger of all the regulators in the economy, in the U.K., has set a new precedent globally. Now, a number of countries across the globe, are thinking on these lines. Recently, Germany has joined the U.K. through creation of the Financial Services Supervisor, a combined regulatory authority for banking, securities and insurance. The logic is simple – integration of the opportunities zone demands a flexible, efficient and effective supervisory regime, which can be accomplished either through effective co-ordination among the regulators or the creation of a single regulatory body. Some economies are choosing the first option and some the second. Wherever the first model for regulations is adopted, regulators would need to strike an intelligent balance between the safety of the markets under their regulatory jurisdiction, and the creative initiatives of the market participants. No matter what, the market should be given a fair opportunity to explore avenues for expansion and growth because that would result in competition in various opportunity domains and thus the emergence of better values to the ultimate customers. Another dimension of the whole regulations would be with regard to the integration of the global regulatory practices. This is thought of from the perspective that today organizations are truly global in terms of raising resources and operational domain. This would definitely demand a greater consistency in the regulatory approach across the globe. The point is getting momentum and may be substantiated from the increase in the numbers of Memorandums of Understanding (MOUs), signed by the various regulators in the global markets, in the recent past. Eventually, the world as a consequence of globalised securities market, may have to move to integrated regulations and even a regulator where domestic regulators will be sitting on the line as watch dogs and make marginal customization to meet the unique challenges thrown up by the local environment. SEBI strongly believes that being protectionist would not work in the long run in this globalized environment and we need to make our Securities Markets competitive;

capable enough to compete with anyone across the globe. Driven by the said philosophy, the goal for SEBI is to make the “Indian Securities Market truly world class, competitive, transparent and efficient.” Accordingly, we are endeavoring not only to adopt global best practices and standards in all the spheres of the Securities Market but aim at leading the global regulatory framework. Today, we can say that our securities market is by and large at par with the international standards in all structural and operating parameters. Indeed we are aiming at making the “Indian Securities Market a Benchmark for the rest of the world”. Conclusion : Let me end by bringing in the beginning. It is globally recognized that the growth of the economy depends to a large extent globally on the growth of the Securities Market as it provides the vehicle for raising resources and managing risks. Today, the wheels of the economy cannot move without the Securities Market. Indeed, it is a modern marvel for accomplishing astonishing numbers in terms of economic growth. Further, today’s Securities Markets are absolutely different from what they were 10 years ago or will be in the next 10 years. They would remain in transition. There would be ups and downs. Many would succeed and many would vanish along the transformation journey. This would always be the reconfirmation of the point that businesses are no more businesses; they have become battles of competency. To conclude, I would say that the Securities Market opportunity zone is contracting somewhere and expanding somewhere. This may appear paradoxical. It must be understood that leadership demands a brilliant focus on emerging opportunities, competence building, strategies for the leadership position in the opportunity zones and principles-centered business practices. Therefore, we need to create a culture, which embraces change and moves ahead with an objective to lead. Let us compete for the future global opportunities.