Jignesh Shah makes for an unlikely empire builder. In person, he has none of the sharp-suited corporate look of his company's official profile pictures. Instead, with untidy hair, a crumpled pink shirt and rimless glasses perched precariously atop his forehead, he comes across much more as the eccentric technical whizz. But it does not take long to realise that he is set on nothing less than world domination.
"We will partner with someone," he says, explaining how he will connect his growing network of commodity and futures exchanges to markets in Europe and the US. "If, that is, we don't do it ourselves." His company, Financial Technologies (FT), has become one of the big contenders in the world of global financial exchanges in a breathtakingly short time. His first exchange, the commodities-trading platform Multi Commodity Exchange (MCX), was launched in 2003 and he stepped outside India's borders just two years later with the launch of the Dubai Gold and Commodities Exchange.
With more than a little umbrage, competitors at NYSE Euronext and LSE are being forced to take him seriously. "FT is likely to emerge as one of the major players globally over the next decade," says William Barkshire, the managing partner of Agora Partners and a former director of corporate strategy at the London Stock Exchange. This year, at just 41, Mr Shah became the youngest Indian self-made billionaire on the Forbes list. Nandan Nilekani, the co-founder of IT giant Infosys, even cites him as his natural successor in his recent book Imagining India.
"Jignesh is India's newest kind of entrepreneur," Mr Nilekani writes, "young, brashly confident, an expert in both technology and the industry that he works in." FT launched the Indian Energy Exchange in June, announced plans for a Singapore Mercantile Exchange in July and launched MCX-SX, a foreign exchange market in October. Then, last month, the company announced an ambitious plan to roll out its 10th exchange, a network that will cover Africa's 53 countries.
The way Mr Shah sees it, financial exchanges are going global, and he wants to be one of the leaders. "There will be four-to-five exchange networks, but they will be pan-world, and each geography will be represented in this big network by one nodal financial institute," he says. Mr Shah has not rolled out his exchanges only to new overseas shores. By bringing his terminals to India's small-town traders and creating open markets for far-flung farmers, he believes his "markets-for-the-masses" model has brought India's poorest citizens into the global economy.
"We have integrated the masses of India in the mainstream," he says. "In India, 22.5 per cent of farmers' production does not reach market, because they don't have a market, they don't know the price, and there's no delivery point. "The moment I establish a market and there is good cold storage ... farmers, of which there are 250 million in India, will benefit." In India, FT's data arm has started sending farmers detailed price information direct to their mobile phones. "Isn't it great? A conventional business will never be able to influence so many people at the bottom of the pyramid."
Mr Shah says what makes him different is the way he combines a technical electrical engineering background with roots in Bombay's street-savvy Gujarati, or "Gujju", business community. "I understand business, I understand technology, I understand the global trends." FT was born out of the five years he spent working in the IT department of the Bombay Stock Exchange (BSE) as one of 14 young engineers hired in 1990 to work on automating BSE trading. As part of the development, he was sent to study exchanges in London, New York and Singapore. He would spend hours in the evenings in the BSE's library steeping himself in the history of India's stock markets.
"I belong to a business community, so when we were at the BSE, I was always constantly thinking of how much maximum technology is going to influence the financial market," Mr Shah remembers. "The very fundamental principles of the market were very clearly visible. But it was also clear that it was a great business opportunity." When the BSE decided to use an outside consultant instead of the eight-member IT team, four joined Mr Shah to form Financial Technologies in 1995.
FT's first product, launched after three years of development, was a low-cost software platform allowing small brokers to trade on the newly automated National Stock Exchange. It now hosts more than 80 per cent of India's trades. But the company's big break came in 2002, when India decided to lift a 38-year ban on commodities futures. FT secured one of the four licences against heavy odds, and his exchange, MCX, has run rings around its rival, the National Commodity and Derivatives Exchange (NCDEX), hitting an 87.5 per cent market share in September.
For Mr Shah, FT's success is evidence that India has commodities trading in its bones. He points to 19th century Bombay's thriving futures markets for opium and cotton, and has even found evidence of futures options in ancient Hindu texts. "It was a latent potential. In 1964, markets were banned. Now it got revived, and within four years, we are in the first 10 markets in the world," he says. "It's proof. It's not just poems."
Today, MCX already ranks eighth in the list of global commodities futures exchanges and FT's profits have grown on the back of it. In the year to March 30, profit after tax rose 885 per cent, and in the first half of this year has increased 222 per cent. Mr Shah thinks this growth has only just begun. "There's a huge growth which is going to happen in Asia, Middle East, Africa and the Far East, and always this economic growth gets reflected into financial markets."
He says he cannot yet identify the future regional equivalent of a London or New York. "I think everyone has its own unique selling point: Dubai has its own potential, Africa has its own potential, Singapore has its own potential, Mauritius has its own potential. I think they have so much potential that they can keep on growing 100 per cent year on year for the next 10 years." What makes FT different is what Mr Shah calls its "full-fledged assembly line production". Instead of waiting for existing exchanges to buy its products, the company identifies gaps in the market, convinces local regulators and launches new exchanges. This way FT avoids getting tied up by legacy computer and trading systems and can replicate essentially the same exchange over and over again. FT operates at low cost - often less than US$10 million (Dh36.7m) an exchange - and remarkably quickly.
Mr Shah explains that the founders had this in mind right from the start: "We were not saying we will go off and work for someone and come back and not hold the IPR [intellectual property rights] of that. We were ready to take a hard route, but at the same time we were creating for ourselves the Coca-Cola formula. We were master of our own creation." Still, FT is more than a one-size- fits-all model. Before setting up MCX, Mr Shah went to huge pains to understand the needs of India's commodity traders, deciding, for instance, to trade the 99.5 per cent pure gold that was the mainstay of Bombay's bullion market, rather than the 99.9 per cent traded on other gold exchanges.
When Mr Shah moves on to his Pan-African exchange venture, which was announced on Dec 9, he gets visibly excited. "We are going to do much more than what we have done in India," he says. "It is revolutionary and it is going to benefit Africans hugely, hugely, hugely. I repeated this word three times. It's going to completely reinvent how an exchange model should work for Africa: it's not standard, it's not straitjacket, it's not copy. It's a unique model for Africa. You can really create a wonderful transparency for 900 million people and put a smile on 100 million people's faces".
FT will take a 60 per cent stake in Bourse Africa, which has a licence to set up a spot and derivative multi-asset exchange for trading in Botswana and will trade commodities, currencies, bonds and diamonds. The bourse will offer exchange-based diamond trading at first. But Mr Shah sees the exchange branching out to eventually encompass trading in just about everything, across all 53 African countries.
He declines to reveal details on how the market, which he plans to launch next year, will function. "The simple answer lies in what is a 'hub-and-spoke' model. But if I tell you then my competitors will benefit." The slump in India's stock exchange this year has slashed Mr Shah's paper wealth by 80 per cent. He won't make the Forbes billionaire list again next year, but this does not appear to worry him.
"Billions never attracted me," he says. "It's not because you are a billionaire that you are doing this. It's because you are doing this that you are a billionaire. At this moment, if stock price is down, you may not be a billionaire, but that's OK." For him, work is its own reward. "I consider my work as worship. [When] work gives a pleasure and a complete focus, that itself is a state of nirvana. And at the same time you are creating such a great efficiency in the system."
For now, the restless entrepreneur who brought markets to India's masses knows better than anyone that in the exchanges business, you cannot stand still. "You have to constantly evolve," he says. "I think financial exchanges are the only entities that have to evolve as fast as time." business@thenational.ae