Recent developments & business opportunities in Indian financial markets

Dear Friends,

Good news !

My article on "Recent developments and business opportunities in Indian financial markets"- has been published by CoolAvenues.com

Here's the link for the article:

http://www.coolavenues.com/mba-journal/finance/recent-developments-and-business-opportunities-indian-financial-markets

I have covered the recent developments in Indian financial markets and the business opportunities that one can avail in this space.

Please read the article [ http://bit.ly/jSEBr3] and I would be thankful for your comments and feedback.

Have a good weekend and do subscribe my blog via email to keep receiving regular updates.

Can less liquidity on an exchange be beneficial ?

Well friends, I am one of those who believes that more the liquidity on an exchange- better it is for the exchange. It helps get more business, more volumes and thus more revenues for an exchange- in terms of getting more transaction tax - if more volumes.

But, can an exchange benefit if the liquidity is too less ?

Naturally, by common sense - one would say that less liquidity is killer for an exchange. But there can be some circumstances where it can be asset.

Let us look at one such circumstance.

Let us suppose we have 2 exchanges. On first one (A) - we have huge liquidity- almost 90% liquidity. Remaining 10% is with exchange (B).

Now, if 2 parties have to do a block trade - which one would be a better place to do it ?

Well, it will not be A, but rather the exchange B. The reason is as follows -

On exchange B, since the liquidity is less, the prices would not move fast- so an intermediary involved in block trade would sell stocks for one party and simultaneously buy stocks for another party. Since exchange B is not so liquid, the intermediary can protect prices for the 2 parties involved in block trade and would be in a better position in getting the buy and sell prices for these 2 parties.

Now, what would have happened had we done this on exchange A:

Since A is highly liquid (90%) and so the bid- ask spread are very tight, it would mean that if a huge buy order is placed, it would be absorbed very quickly from ASK side and similarly if a sell order is placed, again it would be absorbed very quickly from BID side. So movement will be very quick as liquidity is high on both bid and ask side. So, problem is that - for an intermediary, as soon as he buys it, there may be someone on other side who comes and sell all its stock at a very huge price and so the intermediary may suffer losses. And so conducting a block trade can become a challenge because your average buy may not match up very well with your average sell price.

Such a condition would have very less chances to arrive at exchange B- reason being that due to less liquidity, spreads would be far and there would be less players trying to game this exchange. So if intermediary is buying a huge stock, it would have less chances to get someone who sells a huge stock. So on a less liquid exchange, intermediary can buy for one party and simultaneously sell for another party and very well ensure that these trades match up and so the two parties can do block trade with quite stable prices while using an intermediary.

This way the buy and sell prices can be somewhat protected and we can do a much better block trade compared to exchange A.

I hope I have made my point. Any comments in this regard are appreciated.

Do subscribe me by email for more updates !!

How to clear Bloomberg Aptitude Test [BAT] ?

Do you know what BAT is ?

Well it is Bloomberg aptitude test.

So what does this test contains? And what benefits will you get if you pass this test ?

I definitely feel that this test is a value addition to you. For 2 reasons:

1. It adds value to your profile and potential recruiters would know that you are serious about making a career in financial markets.

2. When you study for this test, you will learn many areas that are covered in this test.

Well, friends, here are my experiences while appearing for the Bloomberg test:

1. I found the test easy as most things were already covered during my MBA program- so if you are in midst of your MBA, its a big plus for you.

2. Following were the key areas from where the questions were asked:

Economics

Financial Statement Reporting and Analysis

Valuation

Investment Banking - Corporate Finance and Financial Advisory

Investment Banking - Capital Markets Issuance / Syndication

Global Markets

Investment Management

Verbal Skills

Math Skills

Situational Judgment

Ethical Reasoning

Tasks

So friends, what are you waiting for?

If you want to add value to yourself, do check out the Bloomberg aptitude test !

I have collected the following links to help you with your preparation for BAT -

https://www.bloomberginstitute.com/bat/start/what.php

http://www3.imperial.ac.uk/newsandeventspggrp/imperialcollege/administration/careers/news/news_15-12-2010-10-36-11

http://lsefinancecareers.wordpress.com/2010/10/27/bloomberg-financial-aptitude-test/

http://rightoffthebat.wordpress.com/2010/11/20/bloomberg-aptitude-test/

For more updates, you can subscribe by email to my blog and receive regular updates via email !

What is a merger ?

What Does Merger Mean?

The combining of two or more companies, generally by offering the stockholders of one company securities in the acquiring company in exchange for the surrender of their stock.
It also means that the two companies will stop existing and a new entity (merged) will come into existence.
The formation of ArcelorMittal is an example of a merger. Arcelor and Mittal existence came to an end and a new entity called ArcelorMittal was born.

FIXGlobal Face2Face Meet in Mumbai on 13-Apr-2010

I am planning to attend the FIXGlobal Face2Face meet in Mumbai on 13-Apr-2010.

If you are a stock broker OR a software developer working in stock markets OR a business analyst working with various exchanges OR infrastructure company in stock broking segment OR are keen to learn about Electronic trading in India, do check out this event.

Here are the details:

Connecting the FIX Community
The event leverages the tremendous success of the FIXGlobal Face2Face India conferences over the last two years which saw many buy and sell side participants attended to learn more about electronic trading and the FIX Protocol.
The 2010 forum will look into the business requirements for electronic trading in India via FIX, the current extent of FIX usage in India and the future development in this rapidly growing market.
This event will be free for all delegates but strictly by invitation only. It will consist of a series of presentations, panel discussions, and delegate driven Q&A with solution providers and industry peers specifically designed to get you Face2Face with the people you need to see.

Topics to be discussed:
• Electronic Trading globally and in India
• What Algorithmic Trading means for India?
• Regulator and Exchange Views - Reform and Developments
• Exchange Technology – The Latest Update
• The Buy Side Wish List
• Technology Developments and The FIX Protocol
Delegate driven Q&A with solution providers and industry peers. Networking and Q&A sessions designed to get you Face2Face with the people you need to see.

For more details, pls visit:
http://www.plus-concepts.com/f2f2010/india/

Understanding the sub-prime mortgage crisis in laymen terms

Understanding the sub-prime mortgage crisis in laymen terms

There are different kind of people who want mortgage in US. Those who are good people( who have the ability to pay back) are called prime borrowers. Similarly, those would are not good( those who may not be able to pay back) are called sub-prime. Now there is a guy called mortgage broker. You can assume someone from credit card industry - a credit card agent who is asking you to take a card- someone like that who is asking you to take a house on mortgage. Now, this mortgage broker knows the capacity of different people. He is issuing mortgage at small rates( 4-5%) to prime guys and on higher rate( 11-12%) to bad guys( sub-prime guys) He is doing this because he knows that they ll not be able to pay back, so he tells the bank that take higher interest from them and since they ll not pay back, we will do foreclosure of property and we( bank+broker) will get the house back and we ll make money also in this process. So, what happens is that due to his greed, mortgage broker gives huge loans to bad guys. Now there are so many houses which have been taken up by bad guys. mortgage-broker is happy due to his commisions and bank is also happy that it has put so many houses on mortgage.

So far, the story is good ! Now there is a twist in the story..

Now, here is what goes wrong. One by one, all bad guys start declaring bankruptcy. They are not able to pay back( since they never had the capacity to pay back) and so there are many foreclosures. So now, what we have is more number of houses chasing less num of takers !
By looking at this scenario, all the good guys say that why should we pay higher installments when the houses are so cheap and so they also start defaulting. Due to this, what happens is that banks are left with houses which no one wants to purchase !! And so the banks have no cash. only houses - which have depreciated a lot ! So banks become bankrupt and those who are not bankrupt, they need support from govt ! So the entire financial system has collapsed. And since the value of houses has become too less, the cost price has decreased tremendously- which means that growth is -ve OR there is recession in the economy.

All this, due to the greed of mortgage brokers and the bank officials who filled their pockets-without doing any chcks on people who will default !!!

PS: Dedicated to my friend, 'Ankit Sharma' who asked me to write a simple article on this topic. I hope I am able to give an overview of this financial mayhem in simple language

Do you think Automated Trading has bright future in India ??

Do you think Automated Trading has bright future in India ??


A few days ago i had asked the following question on linkedin:

Do you think Indian Stock Markets are mature enough for Automated Trading ??
Automated trading in US and UK is not a new phenomenon. The term high frequency trading may be relatively new to indian brokers, but in US and Europe, it started more than 10 yrs ago.
Nothing to blame on indian markets, which have just gone into demat format a few yrs ago. So naturally, we had to get opportunities in algo trading v late compared to US/European markets.

So, my question here is: Do you feel that indian markets are mature enough to give the liquidity and volatility for Automated trading. If yes, why ? If No, when you think the markets will offer such opportunities.

I received 5 replies for my question. Here i am publishing the best response as per my knowledge of automated trading. Pls feel free to comment on my question.

I would assume your question is about Algorithm trading and HFT introduction in Indian markets.

As you have said we have not matured in term of market structure to move into these sophisticated means of trading. In my personal opinion here are some of the prerequisites that need to happen –

1. Volume needs to increase (India our daily share volumes should be couple of million viz. US it about 10Bn / day)

2. Spread (bid/ask ration) has not become so thin as in US markets

3. In the passing decade market venues have increased in US from 2 to something like 40, thus creating the problem of liquidity fragmentation. We still are grappling with 8hr trading window with two exchanges… for now forgetting dark pools, ECNs, ATSs

4. One more thing is liquidity moves from one venue to another like a wave across US markets in milli/micro seconds… to capture this liquidity we definitely need to move into the realms of HFT, SOR , Algo trading

5. In the literal sense we don’t have market markers in the Indian context… someone like Madoff securities, Knight capital in the US context are non-existent in our securities market

6. Even in terms of revenue model of the B/D (in US)….there is significant pressures on the commission the B/D collect from investors… revenue from execution only model has been peeny+ized …. While execution+ model has some margin left with them still, as this come with value added services to the investor. So B/D don’t want to incur opportunity cost in not liquidating any small spread that may come up in the various market venues

7. Trading strategies have evolved more towards quant models which are beyond the human traders ability…thus crossing over to the Sci-fi region where machines are better than human traders

8. As you have stated volatility is also a contributing factor for the introduction of HFT & Alog trading. To quote, one of the main reason for Algo and HFT to take a lion-share of the trading techniques in the US market, last year(2009) was the high level of volatility in the penny range($0.001) the investors experienced

Hope this gives a sense of what needs to happen in term of market structure in India viz US.
- Rajasimha Makaram

Feel free to write what you feel about how automated trading has come along in India and how is the future for auto-trading in India.

Why you should join Art Of Living Course ?

Hello Bloggers !


Its been quite a few days that I havent blogged ! Well, I was busy pursuing the Art Of Living Course ( World famous course for Spiritual Awakeing and Medidation led by Sri Sri Ravi Shankar) here in Mumbai, India.

This course is practised by over 20 million people around more than 132 countries worldwide.

As the title of this post suggests- "Why you should join Art of living course?" - I will talk about my experience and other people experience who completed
this course in my batch.


The course I am talking about is Art Of Living - Part 1 Course. I had been thinking for a long time to join a course which may give me more control over my
own life. So in this quest, I landed up with this course. The course started on 14 Apr 2008 and ended on 20 Apr 2008. This one week has been a kind of self
dicovery for me and many things which I didnt knew about myself- I came to know due to this course.

On the first day, we were told that for one week, we are not supposed to touch Tea, Coffee, Alcohol, Cigarrettes. Now I am the kind of person who takes almost 5-6 Tea Cups in a day. And I thought this is just ridiculous, but now its been over a week and I havent even taken half a cup of Tea. This is just one example of my self control which I was not aware of before attending this course.


On the first day, it seemed tiresome and questionable - will we be able to take out 3 hrs per day for continuous 6 days? Well, I feel this course of 22-23 hrs ( spanned over 6 days) has been a great investment by me for me !!


Coming to what the teachers teach you ? Apart for various Asanas, Pranayam, Sudarshan Kriya, and Fun filled activities, the teachers gave us some great knowledge points and they kept repeating those for all 6 days.



Here are few of the knowledge points we gained.

1. Accept People and Situations as they are.


2. Give your 100% in whatever you do.


3. Dont be a football of other people opinion. ( Meaning- Listen to everyone, but take your own decision)


4. Dont look for intention behind other people's mistakes.


5. Opposite values are complimentary ( Meaning- If good times never last, so will be the bad times which will end one day)
These are just a few points that we would always keep in our mind.

Sunday, 20 Apr 2008 was a day of celebration for all of us. We had successfully completed our course. Each participant brought delicious food from home and we had a great breakfast together sharing food with each other. Imagine how much variety we had, as we were 42 participants and everyone bought something or other from their home.

As a Guru Dakshina( Teacher's Gift), the Teachers asked us to practice the exercises daily for 40 days. So today is my 3rd day after the course. And its a long journey. Lets see how it goes...

Feel free to ask me any questions you may have. I will surely reply :)

If you loved reading this post, then do attend their course, and hey, pls subscribe to my blog.

For more information about Art of living: please visit : http://www.artofliving.org/in-en/overview