Actually IB seems to be working towards an early mover advantage in Indian Markets.
Indian Authorities would like to phase out the P-notes and had too, but the recession forced them to re-open the route.
Investors using P-Notes through Foreign Institutional Investors are a big force in India. Problem is beneficiary owners of P-Notes issued by FIIs are not known.
It is well known in Trading Circles that Govt would like to get investment more friendly to Anti-Money Laundering Laws, i.e. disclosed investors/traders, complying with KYC (know your customer) norms with the Indian broker.
NRIs were always allowed to invest in the Indian market. As were FIIs, assumption they would be complying with Money Laundering Laws in their country.
First steps towards liberalization was banning the P-Notes, second was DMA access/STP, third allowing foreign brokerages and fourth was allowing PIOs (persons of Indian origin, not citizens resident or non-resident, but those whose ancestors were Indian citizens) to invest in Indian markets directly. Further liberalizations were just around the corner, when recession stuck.
P-Notes ban has since been withdrawn due to recession & falling markets. All news laws opening up India in the financial sector, were put on hold, probably fearing the financial sector contamination into the relatively isolated Indian markets.
As of now, foreign persons and companies are not allowed to participate in the Indian Market. Foreign Institutional Investors are allowed, with repatriation of investment & profits (though capital gains are leviable), but registration process is a big headache and not suitable for average person.
Debate is mainly about screening the investor so as to avoid Indian markets becoming money laundering hub. As is, it is quite an open secret that P-Notes may be harboring some wrong money.
Further opening up should be quite soon and IB seems to be in a unique position, as it will have firsthand Indian Market experience, compared to others that will come in later.
Sanjay.
