Exchange Competition and Market Impact: Currency Derivatives in India

Rivalry among Indian capital market players, including exchanges and regulators, is not new. It was again observed in the currency derivative space recently. Trading in currency derivatives in India began in August, 2009. The National Stock Exchange (NSE) of India was the first player to offer this facility to investors. Two more players, MCX-SX and United Stock Exchange (USE) later entered into this space. Initially NSE was not charging any fees for trading in currency derivative. There were arguments both for and against such policy. NSE’s stand was that such a move was intended to benefit all players (exchange, members and investors) and thereby develop this new market. However, such a stance taken by the first mover and dominant player in the market meant other players were also not able to charge transaction fees in this market. This led MCX-SX to lodge a complaint against NSE to the Competition Commission of India (CCI). In its order, CCI found NSE guilty of abusing its dominant market position. Subsequently NSE introduced transaction charge in the currency derivative segment starting from 22nd August, 2011. According to NSE, while they are challenging the CCI order, they are ‘implementing its direction to levy charges out of respect for the commission’. As a result, transaction charges are being imposed for the first time in the three-year history of this market segment. The NSE would levy transaction charges of up to Rs 1.15 per 100,000 Rs of turnover in the currency future segment. On currency option contracts, members will pay a transaction fee between Rs 30 and Rs 40 on every 100,000 Rs of premium payable. Also, it would levy an advance transaction charge of Rs 50,000 per member per annum and would charge an admission fee of Rs 100,000 from its existing members and Rs 500,000 from others – this would be set off against actual transaction charges payable by the member in the respective financial year. Subsequently, MCX-SX said that it would also levy charges for currency derivative transactions. The third exchange, USE is still considering on levying charges, and hence is the only exchange left which does not impose charges on currency derivatives. Absence of levies and fees was a big contributor to the growth of currency derivative trading in last few years. Besides no transaction charge, this segment is also not charged Securities Transaction Tax (STT), a tax charged on all other transactions. Therefore trading in currency derivatives used to be a much cheaper option and arbitrageurs were attracted to this segment. With the introduction of transaction charges, costs are going to increase and the volumes are likely to be impacted. The results observed so far are very much in accordance with that. Trading volumes at both NSE and MCX-SX, the two exchanges which introduced transaction charges, fell significantly since August 22, while trading volume at USE actually grew marginally. Compared to the period 1st January, 2011- 18th August, 2011, it can be seen from the figure, average daily trading volumes fell by 20% NSE and by 17% at MCX-SX since 22nd August, while it grew by 7% at USE. Similar trend has been seen in case of trading value as well. It must be mentioned here that trading volume in currency options at NSE actually grew by 8% after introduction of transaction charges. This probably indicates the introduction of charges was a deterrent for arbitrage players who are more active in the future segment.

Observations on HFT

High frequency trading (HFT) has been in news recently, especially after the US stock market crash, also called ‘Flash Crash’ of May 6, 2010 which created sudden panic in the market for a few minutes. Many have blamed high frequency traders and rogue algorithms for suddenly pulling out liquidity, reacting to uncertainty in the market. “Quote-stuffing”, a phenomenon where traders place large rapid-fire orders and cancel them immediately, was highly criticized as a major factor. The debate over the impact of high frequency trading on market stability has invited the attention of the regulators, who are currently assessing the impact of HFT on the market microstructure and gathering opinions of industry participants. Academic research investigating the role of HFT has not clearly reached a conclusion on whether HFT is good or bad for the markets, and there are arguments on either sides of the table. Those in favour of HFT say that it adds liquidity to the market, reduces spread and helps in ironing out price inefficiencies. Those taking the counterview say that HFT reduces book depth, it is unfair to market participants who cannot invest heavily in sophisticated technology, and it contributes to increased volatility. Notwithstanding the arguments over curtailing the freedom of HFT traders and asking for mandatory reporting among other measures, HFT as a trading paradigm has evolved during the last five years, with adoption rates constantly going up. Celent estimates that about 55% of all equities volumes are driven by HFT in US, the number is around 35% in Europe and around 5% in Asia, as shown in Figure. The rise of HFT in US and Europe was driven by regulations such as RegATS and RegNMS in US, and MiFID in Europe which spurred greater innovation in technology. Asia is now being touted as the next growth driver for HFT. Asia has taken to the adoption of HFT rather slowly, much of which can be attributed to the regulatory environment. Japan is an exception, however. Celent estimates that the percentage of equities volumes driven by HFT in Japan is around 30%. The reason is increased fragmentation in the Japanese equities market, coupled with adoption of sophisticated technology. Tokyo Stock Exchange’s adoption of high-speed Arrowhead trading system is a case in point. Japan is an interesting case, because the increase in HFT adoption coincides with increasing spreads and increasing volatility. However, this should not be understood as an insight about how HFT will unfold in the rest of Asia. The market for HFT in US is maturing, and Europe is also headed in that direction, which is why investors could look towards Asia and emerging markets for future growth opportunities. Added to this is also the concern about over-regulation in the Western markets. By maturity, we mean the increased standardization in HFT techniques and reduced diversity in trading strategies to capture unique trading opportunities. Trading firms and even trading venues are dealing with this by adopting sophisticated technology which may be cost intensive, such as upgrading hardware and software for achieving the least latency, for instance. This battle to achieve near-zero latency is not a feasible method for winning the market because of the costs involved. Therefore, the strategy for winning the market in the matured Western markets is moving towards “effective trading strategy generation”, and development of proprietary trading strategies which can be implemented with the existing trading and connectivity infrastructure. Japan and Australia are leading the trend in APAC, followed by Singapore, Hong Kong and Taiwan. China and India are important markets for HFT in Asia, but success will depend on how trading firms find their ways in dealing with the regulatory environment in both countries. Last year, China toughened its regulatory stance on speculation on futures exchanges. The exchanges have increased monitoring of “quote-stuffing”, which was mentioned earlier, and keeping a close watch on investors trading between their own accounts. In India, there have been some healthy signs for HFT. Both the BSE and the NSE have installed new co-location centers, and regulators have allowed ‘smart order routing’ paving the way for increased automated trading. Celent estimates that the percentage of cash equities volumes driven by HFT in India is around 5%. Another encouraging sign is the setting up of a cloud model which offers shared IT infrastructure by NSE. This is a boon to smaller players who do not have the capability to invest in private infrastructure. Instead, they can now plug into the infrastructure provided by NSE and get onto the HFT highway by paying a fee for the services availed. Overall, the signs for growth of HFT in India are positive. There is an interesting pattern that is emerging in relation to cross-asset correlations between asset classes over the last five years. Cross-asset correlations, especially in the developed markets have increased at an alarming rate. What this effectively means is that, portfolio diversification and other hedging techniques are way less effective today in protecting from unexpected price movements, than they were five years ago. There is a peculiar relationship between the increase in multi-asset trading and high frequency trading with increase in cross-asset correlations, which is being investigated. Consequently, alpha generating opportunities in the developed markets have dwindled. Despite the heterogeneity in Asian markets and the several challenges such as regulation, cost of borrowing and liquidity, there is more reason for investors to look towards Asia for future growth opportunities in HFT.

IPO Pricing Issues in India

One of the most important issues in floating an IPO is the pricing aspect. Different forces, often in conflict with each other, are at play here. Issuers would ideally like to maximize the proceeds from the process. Investors would want the offer to be under priced at best and to be (near) correctly valued at worst. Underwriter gets a portion of capital raised as fee, and they would want to maximize their income. But if an IPO is overpriced, there may not be sufficient demand from the market and as a result the issuer may not be able to sell all the shares it had planned. The reputation of the underwriter is also at stake here. It has been observed from empirical data that historically IPOs have been under priced. However, the trend regarding pricing of IPOs seen in India over the last one year has followed an opposite pattern. It has been observed, 70% of the 55 firms that went for IPO during the period April, 2010 to March, 2011, are trading below their offer price. Moreover, 70% of the same 55 firms traded at premium on their listing days, but price fell on subsequent trading days. This implies only very short term investors have actually benefited from these offerings. This is even more surprising when one considers IPO performance in conjunction with overall market performance. In August 2009 BSE created an IPO index that tracks the value of companies for two years after IPO starting from the third day of trading. The graph shows the movement of this BSE IPO index along with that of the SENSEX. It is noteworthy, while the two moved in tandem initially, they have diverged from each other since September, 2010. Thus while the SENSEX gained over 10% during April 2010 to March 2011, BSE IPO index fell over 15% during the same period. This implies overall market condition is not to be blamed for the poor performance of the newly listed firms. This does not augur well for the markets. Retail investors, most of whom invest with medium to long term objectives and are not very sophisticated or well informed, suffered heavy losses and may lose interest in the IPO segment. The pricing of IPOs has come under scrutiny from a number of market participants and the capital market regulator, Securities and Exchange Board of India (SEBI), has taken note of the situation. In the past SEBI had expressed its displeasure regarding overpricing of IPOs and asked the underwriting banks to be more prudent regarding IPO pricing. Recently SEBI proposed that underwriting banks must disclose to investors the performance and track records of their earlier issues in their prospectus and on website. The regulator is also concerned about hyping of public issues through misleading advertisements and media reports and could propose strict penalty if underwriters are found to be involved in such activities. Moreover, SEBI has expressed its displeasure over investment banks, vying among each other to bag deals, quoting very low fees from issuers, thereby promoting issuer interest above investor interest.

Shifting Focus of Hedge Funds: From West to East

Hedge funds in the US and UK have come under greater scrutiny from regulators in the aftermath of the financial crisis. New York currently accounts for about 45% of global hedge fund assets, while London accounts for about 15%. But recent proposals regarding hedge fund regulations have not only prompted fund managers to cancel or delay plans to set up new shops in London and New York, many are moving their offices to Asia, mainly to Hong Kong and Singapore. As a result more Asian hedge funds from Hong Kong and Singapore are gaining prominence and market share. The following can be attributed as drivers affecting this shift: • Stable economies, workforce, less stringent regulations favoring financial services, good financial infrastructure in Hong Kong and Singapore. • Tax incentives, licensing exemptions offered by Singapore and Hong Kong governments. • Extensive tax treaty network with other countries which reduces tax liability in treaty countries. • Easy access to Asia’s growing pool of investors whose risk appetite is also on the rise. • Market conditions and high economic growth potential (India and China) – managers who previously invested in Asia from offices in London or America now prefer to be located in the region within same time zone and with easier access to local information. • Investment firms have had to separate their prop desks from other activities – many ex prop traders are setting up their own shops in the region. As a result of these, assets managed by hedge funds in Hong Kong and Singapore has recovered fast post crisis. Though it hasn’t got back to pre crisis levels yet, these two countries have seen significant number of new hedge funds entering the market in the last 12 months. While the two countries look similar in many aspects with respect to the hedge fund industry, there are subtle differences. While Singapore’s policy framework is more relaxed, Hong Kong has stringent regulatory set up. Hong Kong is closer to mainland China and has better access to Chinese markets and investors. This factor coupled with the fact that Hong Kong had a year’s head start over Singapore regarding hedge fund entry has made Hong Kong the biggest centre for hedge funds in Asia – but Singapore is catching up fast. In both countries the industry is concentrated by top few players; in Hong Kong top 20 funds account for 56% of industry AuM while for Singapore top 7 firms account for 20% of total AuM. Singapore attracts a larger proportion of smaller funds (0-50m) while Hong Kong draws a larger proportion of bigger funds (100-500m funds); this is helped by a regulation by Monetary Authority of Singapore (MAS) which proposed managers with less than $183 million and serving less than 30 investors need not be licensed. This competition between the two countries to attract hedge funds is likely to continue in the future and the industry is expected to register high growth in AuM in the next 12 to 18 months.

Trends in Indian Mutual Funds since Abolition of Entry Load

The Securities and Exchange Board of India (SEBI) has undertaken a number of initiatives and brought in new regulations for the mutual fund industry in the last two years, the most important change being the abolition of entry load for selling mutual fund products since August 2009. The effect of this rule change has been widely debated. Some argue the impact of this change has not been significant as fund flows have registered year on year growth in 2009, while others argue that in absence of upfront commission distributors are now less motivated to sell mutual funds. We take a look at quarterly sales data of equity mutual funds to analyze the effect. Sales of euity funds, which constitute a third of industry AuM, is a good proxy to understand retail investor buying behavior, because the retail (including HNI) segment accounts for around 85% of total equity fund assets. According to data from AMFI, quarterly sales have been steady since the second quarter of 2009, and higher than they were in 2008. However, one needs to decouple the effects of the crisis that hit the markets in 2008. From the figure, one can conclude that though equity fund sales grew after the rule change, they are still far below the trends observed during 2006–2007. The decline in 2008 was due to market conditions, but subsequent recovery has not been commensurate with overall market improvement. Equity fund sales moved in tandem with SENSEX in the pre-2008 period, but post-2008 the gap has widened. Two points are worth considering here. The crisis of 2008 may have made investors more risk averse. While they were buying heavily during the bull run of 2006-07, post-crisis they have become apprehensive of investing in mutual funds. Another reason for lack of investor participation can be the lower returns generated by the fund managers. A recent study by Standard & Poor’s and CRISIL showed that a majority of actively managed mutual fund schemes in India have underperformed their respective benchmarks over the five-year period ended December 31, 2010. This may have made retail investors shy further away from investing in mutual funds. In summary, it can be said that the recovery of the Indian mutual fund industry since the crisis of 2008 has not been commensurate with the overall market recovery. The abolition of entry load has had an impact on sales from the retail segment, but it is not the only reason. Failure to outperform benchmark indices is another equally important issue afflicting the industry.

Quarterly Equity Mutual Fund Sales

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The Securities and Exchange Board of India (SEBI) has undertaken a number of initiatives and brought in new regulations for the mutual fund industry in the last two years, the most important change being the abolition of entry load for selling mutual fund products since August 2009. The effect of this rule change has been widely debated. Some argue the impact of this change has not been significant as fund flows have registered year on year growth in 2009, while others argue that in absence of upfront commission distributors are now less motivated to sell mutual funds. We take a look at quarterly sales data of equity mutual funds to analyze the effect. Sales of euity funds, which constitute a third of industry AuM, is a good proxy to understand retail investor buying behavior, because the retail (including HNI) segment accounts for around 85% of total equity fund assets.

According to data from AMFI, quarterly sales have been steady since the second quarter of 2009, and higher than they were in 2008. However, one needs to decouple the effects of the crisis that hit the markets in 2008. From the figure, one can conclude that though equity fund sales grew after the rule change, they are still far below the trends observed during 2006–2007. The decline in 2008 was due to market conditions, but subsequent recovery has not been commensurate with overall market improvement. Equity fund sales moved in tandem with SENSEX in the pre-2008 period, but post-2008 the gap has widened.

Two points are worth considering here. The crisis of 2008 may have made investors more risk averse. While they were buying heavily during the bull run of 2006-07, post-crisis they have become apprehensive of investing in mutual funds. Another reason for lack of investor participation can be the lower returns generated by the fund managers. A recent study by Standard & Poor’s and CRISIL showed that a majority of actively managed mutual fund schemes in India have underperformed their respective benchmarks over the five-year period ended December 31, 2010. This may have made retail investors shy further away from investing in mutual funds.

In summary, it can be said that the recovery of the Indian mutual fund industry since the crisis of 2008 has not been commensurate with the overall market recovery. The abolition of entry load has had an impact on sales from the retail segment, but it is not the only reason. Failure to outperform benchmark indices is another equally important issue afflicting the industry.

Putting the best foot forward, by choice

The recent City Day organized by SunGard in Mumbai provided interesting insights into India’s equity trading industry. Mr. Damodaran, ex-head of SEBI, the capital market regulator put India’s liberalization and globalization into perspective by pointing out that often in its recent history India has been forced to take actions that are seen to be desirable in hindsight. In 1990-91, it was the precarious forex reserves situation that forced India to open up its economy. Moving on two decades down the line, one hopes that electronic trading in the form of Direct Market Access (DMA), Smart Order Routing (SOR) and algorithmic trading would be something that our capital markets adopt out of choice and because they see the merit in doing so, as opposed to either being forced to do it, or even worse, not doing it at all and facing the possibility of extinction once the global broker-dealers enter the market in a big way. A trend that usually follows the widespread adoption of electronic trading is the concentration of trading, especially in one financial center across a region. In Europe, London happened to be the center that benefited most from the introduction of these technologies. Similarly, markets such as Japan, Korea, Taiwan, Singapore and Hong Kong are adopting high frequency trading in a big way. India cannot afford to be left behind in this context. The same goes for the leading brokerages in the Indian markets. It takes a trading desk between six months to a year to fine-tune its electronic trading capabilities. The longer the delay in getting the buy-in to do so, the lower the chance of success and indeed survival. The buy-side also has to be decisive and quick in its approach. Moving on to some of the other presentations in the event, there were useful inputs given into the issues that are cropping up in terms of the infrastructure for electronic trading. While NSE has a fast matching engine, the rest of the infrastructure has a long way to go. As pointed out, in Indian centers outside Mumbai the contrast between Indian and international capabilities is even more stark and communication networks have been found lacking. Data quality is also something that brokers, especially the smaller ones are struggling with. In this scenario, it is important that India opens up its markets to globally renowned vendors, while at the same time encouraging its local IT firms to also compete in the market. The Indian market is large enough for a number of firms to participate and be able to meet the various requirements for electronic trading.

Accepting the need for Electronic Trading

In its recent history,the Asian market has been characterized by the adoption of technology in a much more compressed time-frame as compared to its counterparts in the western world. This has been true of the industrial as well as the services sector, where it is also holds true for electronic equity trading. Asia is well poised for a rise in the share of electronic trading in the next few years. Markets such as Japan, Australia, Singapore, Hong Kong and India are seeing a lot of investment happening that is related to Direct Market Access (DMA), Smart Order Routing (SOR) and High Frequency Trading (HFT). The associated infrastructure such as market data services, co-location and so on are also being paid attention to, as is the requirement for helpful regulation. However, in some markets, the regulators are not very confident about and supportive of the needs of greater electronic trading. This is partly because of the financial crisis and rising requirements for risk management, and also due to the flash crashes that have occurred in the NYSE and OSE markets. We expect the regulatory framework to become more flexible in most markets, but there is still an important element that needs to be addressed across the board in the Asia-Pacific. That is the role of smaller brokerages and the buy-side. Unlike larger brokerages, these are still reluctant to adopt electronic trading and to make the investments required to have the same. While attitudes and capabilities do not change overnight, I believe that market investors in Asia need to be made aware of some harsh realities. To start with, the way HFT and algorithmic trading evolved in the US and European markets, there was very little time for market participants to react to and adopt such trading. The change happened so quickly that a number of brokerages and buy-side firms were unable to cope and had to operate in a more constrained fashion or even shut down. The incentive that HFT provides for those trading larger volumes means that the smaller players are at a relative disadvantage. This increases even more if they are slow to react and do not adopt electronic trading. So it is not just the speed of trading that is important to succeed, it is also the speed of thought. Hence, smaller brokerages and buy-side firms in Asia should be more positive and not be afraid of investing in DMA, SOR or HFT. The gains from these might not be apparent immediately, but if the lessons from the western markets teach us anything, it is that the quick and nimble-footed firms were the most successful during the rise of electronic trading. With the trading infrastructure in Asia changing so rapidly, there is little reason to believe things are going to be different here.

Mobile trading and Smart Order Routing approved in India

The Indian capital market regulator, Securities and Exchange Board of India (SEBI), has finally approved two different but equally important means of access to the stock markets. Both mobile trading and smart order routing have been approved by SEBI. Mobile trading was being eagerly expected in the retail markets. India has a mobile phone user base of 645 million people, compared to only around 11 million demat account holders. As mobile connectivity is available to a far greater proportion of the population as compared to internet connectivity, industry participants believe that it could lead to a boom in stock market participation. While the brokerages that wish to provide this facility would have to ensure that they provide secure access, encryption and security, we believe that the infrastructure provision would not be the difficult element if mobile trading has to succeed in India. Globally, mobile trading is successful in markets such as Korea where people are very comfortable in using this medium. But in many other leading markets, mobile trading has not really taken off as people do not feel comfortable accessing the amount of information required to come to a decision about buying and selling a stock. So in the end successful adoption will come down to a trade-off between how comfortable mobile trading is as a medium of access and how important it is for the target investor to access the market through his/her mobile. Even though internet connectivity is not available to many Indians, physical access to brokerages still exists in most far flung Indian towns but we still have only 11 million stock market investors. Hence, the Indian brokerages have to ensure they put in sufficient effort to target the latent demand for stock trading in the population. If this does not happen, we could end up with a situation that exists in western markets where only a small proportion of the investors are interested in using mobile trading. While Smart Order Routing (SOR) is a different technology targeting a different segment of the market, a similar word of caution would be in order. The brokerages that want to provide the facility have to comply with a number of regulations. They will have to apply to the respective stock exchanges (mainly NSE and BSE). The exchanges have to communicate their decision to brokers within 30 days. Brokers will also have to submit a third-party system audit of its smart order routing system and software, beside providing an undertaking that the new system will route orders in a neutral manner. They have to provide an alternative mode of trading system in case of failure, besides maintaining logs to facilitate an audit trail. Furthermore, the broker server that would route orders will have to be located in India. So there is a lot of infrastructure that has to be put in place before brokerages can begin to offer the service. Besides, there is still a lack of comfort with the use of the technology in the leading exchange, NSE. Its position as the market leader could possibly be threatened, especially once MCX-SX, the exchange promoted by Financial Technologies, comes online. While SORs could help increase liquidity and encourage algorithmic trading the inability, at times, of the exchanges to cope with high volumes during peak hours could be a barrier to their widespread adoption. As in the case of mobile trading, there are a number of factors beyond the technology itself that will be at play in the next few months and years. So while we are certainly looking forward to the desired success of both mobile trading and smart order routing in India, a lot of effort would be required on part of the brokerages, and also the exchanges, to make this happen. With the large size of the stock markets and the mobile subscriber base, it is easy to think that both these technologies will succeed, but that is not something we can take for granted.

Introducing CDS in India

The Reserve Bank of India (RBI) recently put out a draft report on introducing credit default swaps as OTC derivatives product for corporate bonds in India. Two attempts to introduce the product were already made earlier in 2003 and 2007. The timing of the latest proposal indicates that perhaps the central bank was waiting for the financial crisis to subside and also buy that extra time to learn lessons from the crisis. However, RBI has not incorporated some key lessons from the crisis. The following are a few glaring shortcomings in the proposal – 1) At a time when the world is moving towards centralized clearing systems, issues such as opacity and counterparty risk associated with OTC markets seem to have been overlooked, at least for now. What is more worrisome is that the proposal is not even keen on establishing a trade reporting platform. While it envisages the establishment of a trade reporting platform in the future, the proposal gives a green signal to begin CDS trading without setting up a trade repository. 2) The proposal says that the market is essentially a dealers market. Users are only allowed to buy CDS from dealers alone. However, what is very surprising is that it does not allow CDS buyers to unwind the protection by entering into another offsetting contract. If buyers desire to unwind, they have to terminate the position with the original counterparty, thereby allowing excessive and unfair control to the sellers. 3) The trade reporting format provided in the proposal does not include price data, which makes it even more unfriendly to the buyers. Opacity in prices even on post-trade basis, along with transparency issues arising out of the OTC nature of the market loads the dice heavily against CDS buyers. One would just hope now that the CDS market does not suffer in the same manner in which interest rate futures market did, especially given that India certainly needs a mature CDS market to manage systemic risks prudentially.

25% Public Float in India : Is the timing right ?

The Securities Contracts (Regulation) Rules (SCRR), 1957 was recently amended to incorporate a minimum 25% public float for all listed companies – private and public. The amendment also applies to listed statutory corporations. Public float is defined as that part of a listed company’s shares that are not held by the promoter. The proposal to push for a 25% public float had been around for some time now, and it has finally seen the light of the day, with the proposal turning into a law with a strong push from the Finance Ministry. There is little doubt about the objectives of the amended law – greater public float creates deeper public markets, making the markets more efficient, thereby reducing the cost of raising funds. However, the crucial question that is being asked now is about the timing of the amendment, and about the time-frame given to companies to comply with the new law. While equity markets all around the world still appear shaky and offer no compelling signs of recovery from the financial crisis, it appears that the amendment is a tad hasty. It is not very convincing that the next 2-3 years is the best time to dilute shareholding, especially given the volatility and the subdued valuations. The criticism is equally about the short time-frame (2-3 years on average) given to the companies to comply. This compliance is estimated to raise money in excess of Rs. 1.6 trillion. Companies might be unable to put the forcefully raised money to any better use. The premise that ‘greater public float results in greater liquidity’ also appears shaky. Higher public float might discourage many companies which are more comfortable with smaller divestment from listing. Also, listed companies which do not want to divest at the moment, might rather prefer to delist than comply with the new law. This might in fact result in lower liquidity. While the objectives of the amendment are noble, and definitely in the right direction towards creating more mature equity markets, the government should have waited for more convincing signs of global economic recovery before making the law.