NSE starts operations in Gift City

Exchange aims to capture market share from global financial markets

The National Stock Exchange (NSE) on Monday commenced trading at Gift City- an international financial services centre (IFSC) that offers tax sops to investors. The move comes five months after rival BSE went live with its operations in the special economic zone (SEZ).

NSE will initially offer trading in derivatives contracts of Nifty, Bank Nifty and Nifty IT. The exchange will also open up trading in at least 10 stocks each from the domestic and global markets. Besides, it will also offer derivatives contracts in gold and silver and the two cross currency pairs of euro-dollar and GBP-dollar. BSE’s arm in IFSC called India International Exchange (INX) also offer trading in similar instruments.

Gift City, country’s first IFSC at Gandhinagar in Gujarat, is modelled on the lines of global financial markets in London, Dubai, New York and Singapore.

Derivatives instruments based on domestic indices such as Nifty and Sensex are actively traded in these global markets. For instance, of the total contracts traded on the most-active domestic index Nifty, 55 per cent happen onshore, while the remaining happen in the offshore market.

Both NSE and BSE will aim gain to eat into the 45 per cent offshore market share. NSE IFSC registered volumes of nearly $13 million on Monday until 9:30 pm.

BSE, which launched in January, clocks an average daily volume of around $45 million.

These volumes are still a fraction of derivatives volumes taking place onshore and even offshore. On Monday, derivative volumes on NSE stood at Rs 262,868 crore (around $40 billion), of large portion are contributed by Nifty and Bank Nifty contracts.

Exchanges and other Gift City participants are hopeful regulators, including the Securities and Exchange Board of India (Sebi) and the Reserve Bank of India (RBI), will give a push to the operations by allowing more products.

Trading in rupee-dollar currency derivatives is one of demands being considered by the RBI. It is also said to be considering demands to allow participation of domestic investors in the IFSC under the liberalised remittance scheme (LRS). Sebi is said to be considering demands to allow trading in stocks similar to that in the cash market.  

“Gift City helps us showcase India’s competitiveness. Regulators are committed to make this a success and put it in a fast-track mode,” said Ajay Tyagi, chairman, Securities and Exchange Board of India (Sebi).

Exchange officials said foreign investors will be attracted toward Gift City IFSC as trading here will be more cost effective compared to other global financial centres. Also, investors would prefer trading in India-based derivatives contract in the domestic market once there is enough liquidity.

NSE IFSC will remain open for trading for 16 hours, while BSE INX offers trading for 22 hours.

“Trading hours can be extended depending on market demand,” said Ashok Chawla, chairman of NSE, while adding that India’s geographical location will provide Gift City a competitive edge over others.