According to people familiar with the activity, BNP Paribas SA accounted for close to 50% of the record $4.2 billion in MSCI Inc.-linked equity transactions routed through India's newly introduced closing auction. With that proportion, the French lender topped its Wall Street competitors during the event. At the National Stock Exchange's Aug. 31 close, the bank handled orders of around 180 billion rupees, which comes to roughly $1.9 billion. In that 20-minute slot, turnover ran approximately 33 times the average recorded since the mechanism launched on Aug. 3, as investors adjusted positions for the MSCI changes.
Bloomberg's request for comment went unanswered by representatives of BNP Paribas and Millennium.
Most of BNP Paribas's orders were for global institutional clients, including hedge fund giant Millennium Management, the people said. Nehal Sampat, partner at Price Waterhouse & Co LLP, said that hedge funds are increasingly opting for French banks for India trading and custody because the India-France tax treaty offers favorable treatment, and that the capital-gains perks that previously existed through Mauritius and Singapore have been removed.
Index rebalancing has become a bigger hunting ground for hedge funds. The usual playbook is to anticipate moves passive funds must make, establish positions before the effective date, and try to benefit when index trackers adjust.
Even amid complex trading mechanisms like auctions, steady investing wins over time, so get the free Always Be Buying E-Book
BNP Paribas has been building out its securities services franchise in India, providing custody and other support to global funds and institutional clients. It is also expanding its footprint by establishing operations in GIFT City, the country's international financial hub.
For everyday investors, this is a reminder that end-of-day index housekeeping can trigger quick bursts of liquidity and sharp closing prints. When you see those late day swings around index changes, this is the plumbing behind the move.
