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Industry roundup: 30 December

India to clarify rules for e-commerce

India’s government is expected to revise the country’s e-commerce policy and the rules applicable to the industry, with rules comprehensive guidelines for all online transactions and covering all digital e-commerce and service providers, reports the Economic Times.

Citing individuals familiar with recent developments, it adds that draft versions of the updated e-commerce policy and e-commerce regulations will be released at the same time and will synchronise better with each other to reduce the potential for misinterpretation.

The Department for Promotion of Industry and Internal Trade (DPIIT) under the Ministry of Commerce will release the draft e-commerce policy, which will establish the rules for online trade and address gaps in overall digital commerce policy. The Ministry of Consumer Affairs, Food and Public Distribution will release the draft e-commerce rules aimed at ensuring consumers’ interests are protected.

“Bringing out both (policy and rules) at the same time will ensure greater synergy and more clarity for the industry,” said one of Economic Times’s sources. Before now, the respective drafts released by the two departments have not always dovetailed with each other, creating uncertainty for Indian businesses

However, the DPIIT’s latest policy draft is expected to focus on setting up a regulator, framing an e-commerce law and the penalties for contraventions. It will cover both India’s domestic e-commerce companies and foreign-funded ones. “This will be a comprehensive policy for all e-commerce companies operating in India,” the source confirmed.

An earlier draft of the e-commerce policy focused mainly on principles for the usage of data for development of the industry by Indian and foreign-funded companies to prevent misuse and access of such information.

In June, the Ministry of Consumer Affairs released draft e-commerce rules for public consultation. They sought to bar affiliated entities from selling on e-commerce platforms, as well as restrict flash sales. However, the proposals were opposed by top industry groups and received a negative response from the finance and corporate affairs ministries, as well as the government's public policy think tank, Niti Aayog.

Earlier this year accounting and advisory firm Grant Thornton predicted that India’s e-commerce sector would almost triple in size, from US$64 billion in 2020 to US$188 billion by 2025.

The online retail sector is one of the country’s biggest job creators, but has aggravated smaller traders and offline retailers with alleged predatory pricing, preferential treatment for related parties and flouting of regulations.

Pakistan offers liquidity facilities for Islamic banks

The State Bank of Pakistan (SBP) has introduced a Shariah-compliant standing ceiling facility and open market operations (injections) for Islamic banking institutions (IBIs).

A statement issued by the SBP said that the move is in line with the central bank’s strategic plan to improve the liquidity management framework for the Islamic banking industry and enhance the effectiveness of monetary policy implementation.

“As the size of the Islamic banking industry is increasing, SBP recognises the need to introduce Shariah-compliant liquidity facilities for IBIs,” the statement added.

The facilities will give IBIs parity with their conventional counterparts in terms of liquidity management avenues, and enhance the SBP’s tools for managing market liquidity as part of its monetary policy objective.

The statement confirmed that the Shariah-compliant standing ceiling facility is a Mudarabah-based financing facility (MFF) whereby the SBP will provide financing to IBIs on an overnight basis against Shariah-compliant collateral.

“IBIs shall place the funds received from SBP in a special pool consisting of high-quality assets,” it added. The MFF will be offered at an ‘expected rate’ – equivalent to the conventional overnight reverse repo rate – based on a profit-sharing ratio agreed between the SBP and IBI at the onset of the transaction.

For Shariah-compliant open market operations (injections), the Mudarabah mode of financing will be used. This open market operations (OMOs) facility will currently be available for injection, i.e. provision of liquidity, purposes only.

As with conventional OMOs, the SBP will conduct Shariah-compliant OMOs (injections) based on market liquidity conditions through a multiple price competitive bidding process for tenors as periodically announced by the SBP, against collateral. “Once the expected rate of return is finalised through a competitive bidding process, the funds provided by SBP shall be invested in a pool of high-quality assets by the respective IBI,” said the statement.

BNY Mellon: Six issues will determine future of global capital markets

Global capital markets are being transformed by several interrelated forces in the wake of the Covid-19 pandemic and an uneven economic recovery around the world, say economists at BNY Mellon. The US team believes that six areas will be central to better understanding the dynamics shaping the future of capital markets and have commented on each of them as follows:

Democratisation of public markets

“Today, market data is readily accessible online and new technologies have significantly reduced the cost of trading and other barriers to entry. This means that more people can trade, at any time, from anywhere. Increased access to markets is a positive development, but it is not without risk. It raises important questions about market and institutional resilience, and investor safeguards, as well as opening a broader discussion on financial education.”

Greater access to new wealth creation opportunities
“New products are being developed that allow retail investors to allocate capital to private market alternatives. Here again, challenges surface when opening these products to a larger community of investors. People need to know about the associated risks, which differ materially from investing in traditional stocks and bonds.”

Blurring of public and private markets

“More companies than ever before are entering public markets worldwide, and yet in the US we are seeing firms remain private for longer, and others electing to transition from public to private. This trend is fuelled by heightened disclosure requirements and regulatory scrutiny for publicly-held firms, as well as investor eagerness to fund private companies. Firms are also exploring other avenues to raise capital and reduce dependency on equity markets.”

Concerns around data and cyber security

“Data is emerging as its own asset class, and data management infrastructure is a key growth area for traditional financial firms. Institutions are actively seeking ways to leverage analytics to remain nimble and promote growth. But questions remain around how firms can innovate safely, benefiting from a more agile use of data while mitigating risks.”

New roles for financial firms

“Blockchain and distributed ledger technologies have the potential to disrupt core functions within capital markets, including trading processes, settlement systems, payments, and capital raising. At the same time, regulators and lawmakers are increasingly vocal about concerns around cryptocurrencies, raising important questions around their future viability as an asset class.”

Transparency around Environmental, Social and Governance issues

“ESG is a top priority for financial firms. As investors, asset owners, and corporations navigate their roles in supporting the transition to net-zero and stakeholder capitalism significant questions remain about what market structures and tools are needed to support sustainable investing.”

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