Nifty products still a vital cog in SGX's equity derivatives trading wheel

Trading in Nifty products remains a vital cog in the Singapore Stock Exchange’s (SGX) equity derivatives trading wheel. Nifty-based products accounted for 11 per cent of derivatives trading volume for the June quarter, an analysis of market statistics provided by SGX shows. A total of 5.4 million Nifty contracts were traded on the Singapore bourse in the quarter. 

Bloomberg  data shows Nifty is the sixth-largest contributor of derivatives revenue for SGX, accounting for 6 per cent of its revenues. Nifty volumes on SGX have sustained even as domestic bourses tried to pull the plug on overseas trading in Indian products in February 2018. Nearly 32 million Nifty contracts have been traded since January 2018. While Indian authorities look at this as loss of revenue, SGX maintains its platform is used for hedging  globally. 

Further, it broadens access to the Indian markets to investors who otherwise don’t trade in Indian securities given registration and taxation issues. As a result, the move to completely stop offshore trading in Indian products could hurt foreign investor flow into the country, say some. On Tuesday, NSE and SGX said they had received regulatory approvals to start a trading link at GIFT City. 

 

Under the arrangement, likely to become operational from next year, Nifty volumes currently taking place on SGX will be routed through GIFT City under a ‘connect’ programme.

The move will be a significant boost for Gift City, India’s first international financial services centre (IFSC), given the popularity of Nifty among SGX’s clients.