PM in Singapore: NSE-SGX feud likely to be discussed during Modi's visit

The ongoing tussle between the National Stock Exchange (NSE) and Singapore Exchange (SGX) is likely to be a talking point during Prime Minister (PM) Narendra Modi's visit to Singapore.

According to sources, Singapore-based business groups plan to discuss the issue with Modi to put an end to offshore trading of Indian derivatives. The island nation is a major offshore trading hub.

PM Modi will be interacting with Singapore's corporate executives on June 1.

Sources say Singapore authorities see the feud as a setback to its image as an international financial services hub.  Singapore bourses are known to be a convenient getaway for international investors wanting to access Asian markets. They are expected to urge Modi to ease India's stance.

“Allowing India products to be traded in Singapore is a win-win for both the countries. Platforms such as the SGX are used for hedging. Unlike the perception in India, these trades are not a threat to the onshore market. On the contrary, they boost inflows,” said an official with a Singapore bourse. He added this would be emphasised with the Indian authorities at the forthcoming meeting.

On Tuesday, Monetary Authority of Singapore (MAS), the nation's central bank, said it would prefer an amicable solution to the dispute. The statement from MAS came two days before the PM's visit. Several market participants, such as index provider Morgan Stanley Capital International and foreign investor lobby Asian Securities Industry and Financial Markets Association, have voiced their concerns over Indian exchanges' move to end data feed and licensing agreements with their foreign counterparts.

The SGX and NSE have been partners for over a decade. The SGX entered a license agreement with the NSE to provide derivative products based on NSE indices. 

Due to the cost advantage and minimum entry barriers, the SGX route became popular among foreign institutional investors. At its peak, the SGX Nifty witnessed more volumes than the onshore markets.

However, tension between the exchanges started last year when the SGX decided to launch Indian single-stock futures on its platform, despite the NSE's concerns. Indian bourses, concerned that Indian trade volumes were being exported, decided to snap their data sharing agreements with foreign bourses in February. The foreign bourses, including SGX and Chicago Mercantile Exchange, were given time till August to wind up their India products.

Trading in Indian products accounts for over a tenth of the SGX's revenues. To protect its revenue, the SGX has announced launch of India products. 

The move has led to a legal tussle between the exchanges. The NSE claims the products are an imitation of its licensed Nifty products.

The matter has gone into arbitration. The SGX has deferred the launch of its India products. It will continue to offer trading in Nifty products till August.

Trying to iron out wrinkles

• ‘Singapore based lobbies to take up the NSE-SGX issue during PM’s visit to Singapore
• Singapore’s central bank MAS made its maiden comments on the issue two days before Modi’s visit
• MAS said both the parties should reach an amicable solution
• Several influential market institutions, including 
• MSCI, have warned that the tussle could hurt the image of India as an investment destination
• The recent flaring of tensions was on account of NSE’s legal suit against SGX in Bombay High Court