SGX-NSE Connect gets regulatory OKs in step toward resolving Nifty dispute

Indian temple flowers in Singapore’s Little India neighborhood; taken October 2018.Indian temple flowers in Singapore’s Little India neighborhood.

Singapore Exchange (SGX) and the National Stock Exchange of India (NSE) have received regulatory dispensations for a joint proposal to boost the trading of Nifty products, the two exchanges said in a statement Tuesday.

The tie-up would resolve a long-running dispute between SGX and NSE over the trading of Nifty derivatives. Both exchanges said they are working to discontinue the related arbitration proceedings.

In a February 2018 note, Goldman Sachs had estimated that 10 percent of SGX’s derivatives business revenue came from the Nifty F&O and rupee futures, two key India offerings.

The proposed NSE International Financial Service Centre (IFSC)-SGX Connect plans to create a large pool of liquidity from international and home market participants for the trading of Nifty products in Gujarat International Finance Tec-City (GIFT), the statement said. The Nifty 50 index is NSE’s benchmark equity market index.

The Connect model would allow SGX and NSE IFSC members to access Nifty products in GIFT, while still managing their exposures via their respective clearing corporations, the exchanges said.

The exchanges are aiming to make the NSE IFSC-SGX Connect operational by the end of 2020, but it was subject to members’ readiness and further regulatory approvals, the statement said.

“As Asia’s most international and connected multi-asset exchange, we are committed to providing our global institutional clients with open,
single-point access to Asia,” Loh Boon Chye, CEO of SGX, said in the statement.

“India is an important market for international investors and we are committed to collaborating with NSE and other stakeholders to build connectivity and access to one of the fastest growing economies in the world,” Loh said.

Vikram Limaye, managing director and CEO of NSE, said the tie-up was a “great opportunity” to build the GIFT City markets.

“We are working on varied product offerings to make GIFT City the hub of activity for all India access products across asset classes for international investors and a gateway for home investors to access international markets,” Limaye said in the statement. “Our partnership with SGX is an important step for GIFT City to realize the vision of our Honourable Prime Minister of India to be the preeminent financial center serving the needs of home and international stakeholders.”

In February 2018, Indian stock exchanges decided to cut off foreign exchanges’ data access for derivatives products in an apparent belief that the foreign exchanges were “stealing” volume to offshore markets that could be settled on the subcontinent. It’s unclear if the move to block overseas derivative use would have led to investors cutting their India exposure or boosting their onshore trade.

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