CME, ICE plan exchanges at GIFT City IFSC

Looking to partner exchanges that have shown interest

The CME group and ICE are exploring possibilities of opening centres at the International Financial Services Centre (IFSC) coming up at Gujarat International Finance Tec-City (GIFT City) near Ahmedabad.

Sources in the know said that CME group officials visited GIFT City a few days back to explore possibilities of starting an exchange. The group is also said to be exploring JV options with groups that have already shown interest in IFSC.

The CME group and ICE are among the world’s largest and most diverse derivative exchange groups.  When contacted, the CME group declined to comment. However, sources said that being the largest they would go for large exchanges only. They added that CME may join NSE and offer its products on the latter’s international exchange at IFSC. NSE, however, has denied this.

CME group’s interest in Indian commodities is well known. They had tried to pick up a stake in MCX earlier but didn't succeed. CME, however, has a tie-up with MCX, which allows MCX to settle some of their contracts at CME prices.

MCX has so far not announced its plans for the international stock exchange. However, according to sources, the exchange will finalise its plans in its next board meeting scheduled for 30 April.

Even ICE, which has a small equity stake in NCDEX (National Commodity & Derivatives Exchange), is said to be exploring opportunities. A ICE spokesperson said, “We don’t have a comment at this time, however, we retain a small minority stake in NCDEX.”

NCDEX has signed an MoU with GIFT City for setting up an international exchange at IFSC. When asked whether ICE will be their equity partner for the venture, a NCDEX spokesperson replied, “ICE is our shareholder, with a keen interest in Indian markets. As our recent MoU clearly indicates, we see the GIFT City initiative as a welcome step for the sector. However, there are no talks on for a JV with ICE for GIFT City.”

After Finance Minster Arun Jaitley launched IFSC at GIFT City earlier in April, it has been generating huge interest. But none of the overseas exchanges would be in a hurry to launch operations.

According to an industry official, most players are waiting for the government to announce the tax rate applicable to IFSC, and whether CTT and STT are being exempted or not. Even players are waiting to know the legal and appellate mechanism at IFSC. Most players favour Singapore-like arbitration authority which works in time bound manner and financial appellate tribunal for all other disputes that cannot be solved through arbitration mechanism.

Meanwhile, the Bombay Stock Exchange has already said that Deutsche Bourse will be a equity partner in its exchange coming up at IFSC. The bourse holds a 5% stake in the BSE.

Apart from exchanges, banks and insurance companies are also showing interest in IFSC. A financial market veteran said that IFSC is a good place for re-insurance business.