The exchange will be inaugurated on January 9 by Prime Minister Narendra Modi. Other products would include rupee and equity derivatives, as well as derivatives in indices developed by S&P, Indian or international.
In commodities, BSE plans to launch gold, silver, non-ferrous metals and crude oil derivatives, including their options, and dollar-rupee futures. Using its tie-up with S&P indices, derivative trading in local and global indices would be launched gradually.
Will Indians be able to use the foreign investment annual limit of $2.5 lakh is not clear. Market participants and stakeholders have asked Sebi and the Reserve Bank to permit using this facility in derivatives trading on the GIFT City-based international exchange.
B K Sabharwal, immediate past president of the Commodity Participants Association, said: “Brokers are enthused about trading on the GIFT-based exchange, including commodities, as there are several benefits”. The benefits include exemption in commodity transaction tax, stamp duty, service tax and so on. The regulator has permitted trading for the whole day and rupee-dollar futures would be another attraction; these are traded only on the Dubai-based DGCX.
A broker said on condition of anonymity, “Brokers are initially looking to do proprietary trading and jobbing on the international exchange as there will not be any Securities Transaction Tax, service tax or stamp duty. Even short-term and long-term capital gain tax or treating derivative gains as speculative profit will not be there. Only MAT (Minimum Alternate Tax) might apply, which will help them generate volume and do market making till overseas clients come to them."
From April, tax changes in India will make it costlier for foreign portfolio investors and individual foreign to trade on Indians exchange; it will be relatively attractive for them to trade in the GIFT City-based exchange.
In the commodity segment, only non-agriculural ones will be permitted for trading on the GIFT international exchange, as Sebi wishes to first assess the impact on commodity prices.