NSE, SGX joint trading at GIFT likely to take place by December

Regulators have asked stock exchanges to find a commercial solution feasible to both

Amid arbitration proceedings, the proposed collaboration between the Singapore Exchange (SGX) and the National Stock Exchange (NSE) to jointly offer trading at Gujarat International Finance Tec (GIFT) City could take shape before the end of the year, said people with knowledge of the development. GIFT is India’s only International Financial Services Centre (IFSC). Sources said currently both the exchanges are seeking feedback from market participants. In October, they could approach their respective regulators with the proposed plan and later launch the products for GIFT City. A source said trading in the new products could start by December.

Sources say the regulators of both the countries are keeping a tab on the development and also supervising the product specifications and operational issues.

“All stakeholders want to resolve the ongoing legal tussle. Regulators have asked respective stock exchanges to find a commercial solution which is acceptable and feasible to both,” said a source.

Sources say there could be some changes required to the IFSC regulations to facilitate the proposed plan.

In an email response to this newspaper, NSE spokesperson said, “The matter is sub judice. Hence, we cannot offer any comment on the matter.” An query sent to SGX did not elicit an immediate response. NSE and SGX restarted talks over GIFT City following a meeting held between the Securities and Exchange Board of India (Sebi) and its Singapore counterpart Monetary Authority of Singapore (MAS). “Sebi and MAS held discussions on various issues of cooperation, including the amicable resolution of the NSE and SGX issue,” Sebi had said in a statement on July 25.

“Both regulators agreed that the collaboration between both authorities would be further strengthened so as to derive benefits for capital markets of both the countries. Both regulators also agreed that NSE and SGX would carry out necessary discussions to come up with a solution that is acceptable to both the parties,” the statement added.

According to experts, GIFT-connect between SGX and NSE would enable the Singapore bourse’s clients to deal in Indian derivatives. Just like SGX, Gift City is a low-cost trading destination as it offers exemption from capital gains, securities transactional tax (STT) and stamp duty. At present, dollar-denominated contracts of Nifty are traded at NSE IFSC. In February, the NSE and BSE decided to stop giving data access to foreign bourses such as Singapore and Dubai. The move was to curb offshore derivatives trading in Indian products. 

STORY SO FAR

• Feb 9:  Indian exchanges end data sharing tie- ups with their foreign counterparts; agreements to end this month 
   
• April 11:  SGX announces new India products; says it will migrate client positions to new products in June
   
• May 21:  NSE moves Bombay HC to stop SGX from launching new India products
   
• May 22:  Court grants interim injunction against the launch of new India products
   
• May 29:  SGX says it will continue listing SGX Nifty contracts till the end of this month 
   
• June 18:  Arbitrator directs NSE to extend pact on Nifty contracts till the final arbitration award
   
• July 25:  NSE, SGX deferred the arbitration proceedings for short term

To counter the move, SGX, where trading volumes in Indian products accounted for substantial volumes, announced the launch of new India products to replace Nifty-licensed products. The move was challenged by NSE as the new products were an exact replica of Nifty products that it licensed. The matter latter went into arbitration.  

Currently, arbitration proceedings got deferred after NSE and SGX resumed talks over GIFT City. “Pending the outcome of the discussions, the learned arbitrator has granted a deferment of the arbitration proceedings between SGX and IISL, the NSE’s index company,” SGX had said in July.

However, the directions under the arbitration order remain effective, which means SGX will not be able to launch its new India products. In the offshore markets, NSE's Nifty is traded on Singapore bourse and BSEs Sensex is traded on the Dubai Gold and Commodity Exchange (DGCX). The trading at this destinations could virtually stop as Indian bourses have snapped licensing and data-sharing ties.