Mr. Ghanshyam Dass

Mr. Ghanshyam Dass

The 'Ides of March' look to extend all through the year. The recession in the U.S economy is slowly bringing Uncle Sam and the rest of the world to its knees. As the slowdown is cutting across all types of businesses, the Stock markets of the world have mirrored the depression. The Indian bourses, though reacting to different reasons altogether, has also slid to low gear as the Sensex hit the 3500 mark. New York's Dow Jones index has hit its lowest mark since March 1999. And NASDAQ, the whiz kid among all the markets, crawls to the 1800 point mark. Its lowest since November 1998, and this time it is not the tech stocks to blame. With liberalisation the key word, Indian companies had been quick to jump on the global bandwagon, with Information Technology companies leading the way. An ADR issue followed by listing on the NYSE or NASDAQ was the route to take for raising foreign funds and reputations. Following the listing of Indian IT companies on NASDAQ, and the potential for more to follow, NASDAQ made its move to open a liaison office in India. After much consideration, they finally opted for Bangalore, India's Technopolis and home to two of the three Indian tech companies listed on NASDAQ. The figures tell it all. In the year 2000, NASDAQ's dollar volume stood at a historical 20 trillion dollars. That is greater than the total combined volumes of the next 3 largest exchanges in the world. And an 85% increase from 1999. In an exclusive one-on-one interview, Mr. Ghanshyam Dass, NASDAQ's Director for South Asia, talks to Online Bangalore, on NASDAQ's plans for India, the effects of the recession and the procedures and advantages of listing in the biggest and the fastest growing Stock Exchange in the world.

Mr. Dass graduated in Economics from Delhi University and holds a Masters Degree in Linguistics from JNU, Delhi. He has had a brilliant career in both domestic and international banking. After his early years with Bank of India, he worked with the Wells Fargo Bank, San Francisco and Marine Midland Bank, New York as their India representative. He then spent ten years with HSBC as Manager - South East Asia and Middle East, before moving on to the British Bank of the Middle East as CEO of its India Operations. Before joining NASDAQ International Ltd., in 2000 as its Director South Asia, he was the Chief Executive of the Majan International Bank in the Sultanate of Oman.

When did you decide to open an office in India?
This Nasdaq office is only the third office in the world of Nasdaq International Ltd., other than the ones in London and Sao Paolo (Brazil). We had been looking at India for over two years. With various heads including the Vice-Chairman, Presidents and Vice Presidents making regular visits to assess overall potential.

Why did you settle for Bangalore?
In fact, every state government in the country approached us and each of them was very enthusiastic and keen to have us in their respective states. With a view to avoid 'Political quagmire' and also the fact that it all originated from Karnataka with Infosys being the first company to list on Nasdaq as also on the US Bourses, the support from the Karnataka Government and the presence of many 'hidden diamonds'' made us decide on Bangalore. We inaugurated on the 12th of February 2001.

The Nasdaq has taken a beating, is it due to the recession in the U.S?
The economic recession in the United States has slowed down every industry, not only the tech segment. And since stock markets are sensitive to economic changes, this has effected stock exchanges worldwide including NASDAQ.

How long do you think this slowdown is going to last?
I'm unable to predict its duration, but I'm positive that there will be a turn around soon. And unlike the major economic depressions in downturns in the past i.e. 1927 and 1987, which took longer to get the economy back on track, this time, the turnaround time will be much faster.

How many Indian companies are listed on Nasdaq?
There are 3 companies presently listed with us. They are Infosys Technologies, Satyam Infoway and Infosys was the first to enlist both with Nasdaq as well as the US Stock Market.

How many companies do you figure will enlist this year, now that you have a presence here?
Talking of Bangalore alone, there are more than 800 companies here. We are optimistic that by the end of this year and subject to favorable market conditions to enlist at least 8 to 10 companies from across industry segments all over India.

Has the recession affected the number of initial listings this year?
Yes. Totally there are over 4800 companies both U.S and non-U.S listed on Nasdaq. In 1999 of the 440 fresh companies that were listed in all U.S.Stock Exchanges put together, Nasdaq alone accounted for 398. But this year till March, there have been only 24 fresh IPO's in all, of which 13 have been with Nasdaq. 2 on Amex (a subsidiary of NASD), and 5 on NYSE. Yes, the recession has definitely had its effect.

What are the unique features of Nasdaq?
Firstly, an excellent market model offering absolute transparency in operations, Secondly cost and time efficient processing - due to advanced technology make us cost effective, the liquidity factor and lastly an inclusive market model.

How does Nasdaq operate?
Unlike traditional stock exchanges, Stocks are traded on the exchange through our electronic trading platform and competing Market Makers. The 550 odd Market Makers registered with Nasdaq represent some of the biggest financial institutions in the world. It is mandatory for the Market Makers to quote both a Bid (Buying) price as well as a Ask (selling) price for each stock that they trade in, thus displaying a spread or range price for the stock. As each Market Maker quotes his spread, irrespective of whether he is buying or selling, the investor is offered the best choice spread for trading. For investors, operating through online trading mechanisms ensures a transparent, speedier and cost effective operation. The Nasdaq system can handle over 3000 transactions per second with simultaneous price discovery at less than 500 milliseconds. As a exchange, we ensure that investors are able to make informed investment decisions.

What are the measures to prevent scenarios like indiscriminate short selling?
All the preventive measures are built into the system and are very well understood by the Market Makers. Nasdaq deploys an excelent surveillance mechanism to ensure a fair and orderly market operation. In the event that any of them oversteps the regulations, they are automatically cutoff by the system and stringent measures like fines are imposed on them. So you see it is fool proof, good protection for the 'Patel on the street', so to speak!

What is the settlement period for the Market Makers?
The settlement tenor for all traded stocks is three days from the date of the transaction (T+3). It is a common U.S. standard in all American Exchanges. However, on Nasdaq, transactions are settled within 2 seconds.

What are the expenses for initial listing at Nasdaq?
Anywhere from 5000 U.S.Dollars to 50,000 USD for initial listing depending on the size and composition of the issue, which is almost one tenth of what NYSE charges.

What are the additional benefits offered to companies that enlist?
On the day of listing, the listing ceremony will take place at the Nasdaq Market Site located in the heart of Times Square. Here major TV broadcasters will transmit live the trading sessions. The ceremony will also be displayed on the world's largest permanent light display screen along with the company's corporate promotional material. This will also be webcast live on with links to the company's website. The Nasdaq website gets over 50 million hits a day. Nasdaq will also provide space for visiting journalists to attend the ceremony as well as host a private lunch with Nasdaq's executives. And also Host a dinner reception for 150 people to invite associates and customers to celebrate the listing. In addition out ongoing support includes a subscription to the Nasdaq International magazine, the Institutional program to raise awareness among institutional investors in Europe, Networking Forums and Media PR programmes.

How would you fix the ratio of institutional investors and retail investors in Nasdaq compared to India?
It is 80% of institutional investors and 20% of retail investors, which is common in other U.S exchanges too. Whereas in India the institutional investor accounts for more than 95% of the trading.

Has the profile of the investor changed through the years?
In line with Game Theory, basically investors could be divided into three categories - Investors who play the game of risk, the game of skills and the game of strategy. Gamblers fall in the risk category, throwing caution to the wind. Skill players are the speculators, forever keeping an eagle eye on everything, while the strategists are the long term players who are in the game for gain only in the long run. While earlier it was more of strategists, today the players are more of a combination of the risk and skill category. For example in Hong Kong, the average holding of a stock is just one week! But the key word to watch out for is performance. Performance leads the market.