India Inx planning new platform to make buying shares of foreign cos easier

Buying shares of foreign companies is likely to get easier. According to sources, India Inx, an arm of leading bourse BSE, plans to launch a platform to directly deal in shares of companies listed across the globe.

The platform, likely to be called India Inx Global Access, is being created from the Gujarat International Finance Tec-City (GIFT), an International Finance Services Centre (IFSC) where India Inx is headquartered.

Sources say India Inx is already in talks with numerous global exchanges, including the Chicago Mercantile Exchange (CME) and Dubai Stock Exchange, to provide the facility. The platform would be a sort of exchange connectivity between India Inx and a foreign bourse, wherein the partner exchange will execute all trades on behalf of India Inx. It will be open for all trading members registered at IFSC. Some domestic investors will also get to use the facility if they register as a family trust or limited liability partnership.

It is learnt India Inx is in the final stages of getting approval from the Securities and Exchange Board of India and the Reserve Bank of India.

“The platform will provide a unique trading opportunity for Indian investors to trade in foreign equities. We are in talks with several major global exchanges and the platform is expected to go live in the next two months,” said a source.

While the facility will not be directly open to onshore investors, there are structures through which domestic investors can get access to the proposed platform, said a source.

Investments by Indian nationals in foreign jurisdictions are subject to high compliance requirements. All such purchases have to comply with the rules under the Foreign Exchange Management Act (Fema).

Further, since these investments involve remittance to a foreign destination, the Liberalised Remittance Scheme would also apply. Under this, no Indian resident can remit more than $250,000 during a financial year to another country. This includes all modes of investments.

It is unclear if these restrictions would continue to apply for India Inx Global Access. The central government has been aggressively pushing the idea of an IFSC since India has been losing out on trade volumes to other offshore destinations. Apart from tax sops, the compliance burden at IFSC is less.

Currently, a few Indian brokerages such as ICICI Direct allow clients to trade in offshore equities. To do so, they have tied up with US-based brokerages which execute the final orders on behalf of Indian brokers. Some domestic fund houses such as ICICI Prudential and Motilal Oswal also offer schemes that invest in markets abroad. 

However, these are typically feeder funds --managed by a fund abroad. This route is not preferable for investors who wish to take exposure to individual stocks.