Bourses eye overseas ticket with Ifsca's new GAP framework at Gift City

Indian exchanges turn to IFSCA's GAP framework at Gift City to offer global products including ETFs, mutual funds and select derivatives, tapping investor appetite for diversification

With Indian investors increasingly seeking diversification and offshore opportunities, the country’s stock exchanges are tapping the International Financial Services Centre (IFSC) in Gift City’s Global Access Provider (GAP) framework to offer overseas products ranging from exchange-traded funds (ETFs) and mutual funds to select derivatives.

 

The IFSC regulator, International Financial Services Centres Authority (IFSCA), introduced the GAP framework in August to channel cross-border capital flows, and connect Indian markets with global financial centres.

 

Under this regime, global access providers can facilitate trading in financial products listed on overseas exchanges, enter referral agreements for foreign mutual funds and alternative investment funds that are not directly traded abroad, and also offer additional products permitted under the Foreign Exchange Management Act (Fema).

 

Permissible offerings may also cover certain global derivatives, excluding index derivatives, bond derivatives, or USD-INR contracts already available on recognised exchanges in the IFSC.

 

Following the new regime, the National Stock Exchange’s (NSE’s) international arm at Gift City is establishing a step-down subsidiary, NSEIX Global Access IFSC, for these offerings, sources said. The Securities and Exchange Board of India (Sebi) cleared the subsidiary in August.

 

Rival BSE’s India International Exchange (India INX) set up a global access platform back in 2018, which is already working with nearly 10 global brokers and more than 5,000 clients. The exchange is now in talks to expand its menu of exchange-traded products.

 

“On products like the large pool of global mutual funds, we are operationally ready, and are working to close the paperwork soon. Discussions with both domestic and international banks are underway, and we hope to close these alliances soon. We are also speaking with several other domestic and international brokers to act as referral partners,” said an India INX spokesperson.

 

IFSCA expects the framework to meet rising investor appetite for global diversification — whether for higher returns, hedging commodity and currency risk, or arbitrage opportunities across markets.

 

But industry executives flagged some uncertainties. One pointed out that the circular assumes Indian brokers cannot directly offer international stocks — despite several already doing so outside Gift City.

 

“Unless brokers are mandated to operate through the IFSC, many may avoid setting up separate units there, given the additional staffing and compliance requirements,” said a senior industry executive.

 

The framework prescribes that all client funds for global access must be routed through IFSC-based bank accounts. IFSCA has also allowed banks and payment service providers (PSPs) at IFSC to process cross-border flows, which it says will improve efficiency in a regulated environment.

 

“IFSCA has also permitted banks and PSPs in the IFSC for facilitating movement of funds for global access activities, which will enhance efficiency and competitiveness in cross-border payments in a regulated manner,” said Pradeep Ramakrishnan, executive director (ED), IFSCA.

 

For resident Indians, only products permitted under the Reserve Bank of India’s Liberalised Remittance Scheme (LRS) will be available.

 

The regulator has also set net-worth thresholds and fit-and-proper criteria for entities acting as global access providers, along with risk management and internal control norms. 

Global access 

• Ifsca’s GAP framework enables offshore investment products access
• Investors seeking exposure of global ETFs, stocks, derivatives
• Ifsca prescribes routing client funds via IFSC banks
• NSE International Exchange in process of setting up a GAP subsidiary
• India INX working on global mutual funds, discussions ongoing with international brokers