Q1. Could you start by giving us a brief overview of your professional background, particularly focusing on your expertise in the industry?

I have a strong professional background, having worked in the financial markets sector for the last 30 years. Over the years, I've developed knowledge in several crucial fields, such as product development and strategy, client relationship management, market analysis, and regulatory compliance. 

As Head of Equities at UBS India, I held a leadership position. In this role, I was in charge of establishing electronic desk infrastructure, greatly increasing operational efficiency, and spearheading strategic planning projects. 

In addition, I oversaw the introduction of new innovative products like the Blocks Desk. This extensive journey has provided me with a comprehensive understanding of the financial markets, inherent challenges, and evolving opportunities. 

Q2. What key changes have you seen in the Indian equity landscape over the past decade?

The Indian equities scene has changed significantly in the last ten years. 

• Online trading platforms and a rise in demat accounts have contributed to the boom in retail involvement
• Due to their significant AUM growth, domestic institutions (DIIs) have emerged as significant market participants, offsetting foreign inflows
• With much shorter settlement cycles and a greater use of algorithmic trading, trade efficiency has grown.  The overall regulatory framework has evolved
• Due to India's growing influence in emerging markets and a thriving Initial Public Offering (IPO) market capitalisation has increased significantly

Q3. How is the shift towards electronic trading platforms affecting traditional brokerage models in India, and what strategies are firms adopting to stay competitive? Give some examples

The shift to electronic trading platforms in India has had a significant impact on traditional broking methods, forcing them to adopt a hybrid approach that blends high-touch (worked order desk) and low-touch (electronic desk) services. 

A growing percentage of all trading volumes are now electronic. The vast internet platforms offered by most major Indian trading houses and discount brokerages empower retail investors. Similar to their FPI counterparts, domestic institutional investors (DIIs) are increasingly using automated trading strategies, especially when it comes to liquid large-cap stocks. 

More money is being allocated to the development of sophisticated algorithmic trading, which will increase speed and transparency while reducing market impact. The revenue of traditional broking firms has undoubtedly been impacted by reduced broking fees brought about by direct market access.

Q4. What product innovations are gaining traction within equities and delta-one strategies?

Within its prime broking services, the majority of Delta-One desks generally provide long-only exposure through synthetic instruments such as swaps, principally serving hedge funds. Short selling against Delta-one assets is prohibited by current laws and hence participants mostly use the listed derivatives sector for such tactics. Product derivatives based on MSCI, and other international indexes are in demand. 

Through the development of products centred on particular industries, investing themes, and tailored exposures, product innovation within Delta-one strategies is gaining popularity. The development and use of these methods are also being influenced more and more by factor-based investment techniques, which take into account variables including value, momentum, and volatility.

Q5. What competitive threats are emerging from fintech platforms, Decentralized Finance (DeFi), and Alternate Trading Systems (ATS)?

A major threat to retail broking is the fintech industry's explosive growth in India, where several players have achieved unicorn status and shown they can upend established broking. These fintech companies are now present in trading applications, which use technology, offer app-based interfaces, and incorporate product offerings, in addition to payment gateways and lending services. Their size, much lower broking rates, and capacity to draw in a sizable retail clientele are important competitive advantages.

Due to the regulatory requirement that all financial intermediaries (brokers and exchanges) be registered and subject to regulation, Decentralised Finance (DeFi) and Alternative Trading Systems (ATS), including dark pools, have not been widely adopted in India. 

Q6. If you were an investor looking at companies within the space, what critical question would you pose to their senior management?

Given the dynamic and competitive nature of the broking industry, if I were an investor considering allocating capital to this space, the critical question I would pose to senior management would be: 

• What is the total addressable market and its projected growth trajectory?
• What key competitive advantages differentiate this business, and what establishes its unique "right to win"?
• Are there any anticipated regulatory shifts that could affect operations, and what proactive strategies are in place to mitigate potential impacts?
• What is the landscape of potential new entrants and the likelihood of industry consolidation?
• What is the current cost-to-income ratio, and how can technology be leveraged to optimize cost efficiency?
• How effective is the firm in attracting and retaining high-calibre talent?
• What strategic investments are planned to facilitate future business expansion?
• Does the management team exhibit adaptability and agility in response to evolving market dynamics?