A $7.5 billion derivative trade shifts to India as SGX feud ends
Synopsis
As a cross-border trading connection between the two nations’ leading bourses becomes completely operational, derivative contracts worth $7.5 billion transacted in Singapore will be transferred to India. The move demonstrates India’s success in drawing trade from global financial centres such as Dubai, Mauritius, and Singapore. The disagreement between the National Stock Exchange of India and the Singapore Exchange over single-stock futures trading has finally been settled, with futures and options trading taking place in India’s GIFT City and clearing handled by the SGX.
Derivative contracts worth around $7.5 billion sold in Singapore will be transferred to India as a cross-border trading connection between the premier bourses of the two Asian nations becomes fully operational on Monday.
From July 3, SGX Nifty, the Singapore Exchange Ltd.-traded futures on India’s important stock NSE Nifty 50 Index, will be rebranded as GIFT Nifty, and all outstanding orders will be relocated to GIFT City, the new financial centre in Gujarat, western India.
The transition from SGX to the NSE International Exchange at GIFT, or Gujarat International Finance Tech-City, also demonstrates the partial success of Prime Minister Narendra Modi’s administration’s efforts to attract India-centric trading that had previously relocated to global financial centres such as Dubai, Mauritius, and Singapore to its shores.
“We expect the liquidity pool to grow as all orders from Singapore are routed into our platform, and local brokers from IFSC can trade as well,” said V. Balasubramaniam, chief executive officer of NSE IX Ltd., a subsidiary of National Stock Exchange of India Ltd. “Contracts with a total open interest of approximately $7.5 billion are being switched.”
The action effectively ends a five-year dispute between the National Stock Exchange of India Ltd. and the Singapore Exchange over the latter’s desire to establish single-stock futures trading on shares of some of India’s major firms as India attempted to build its equities market. After temporarily entering a legal struggle, the disagreement was settled peacefully.
In fiscal year 2022, Nifty derivative contracts were the second-largest contributors to SGX’s equity-derivative volumes after SGX FTSE China A50 Index futures, and helped boost the bourse’s income via greater average fees and volumes.
SGX and Nifty would divide expenses and revenues “roughly 50-50,” according to Michael Syn, SGX’s head of equities. Futures and options trading would take place in GIFT City, with clearing handled by SGX, he noted.
To begin, investors may access derivative products such as the GIFT Nifty 50 and GIFT Nifty Bank, and more indices will be added progressively, according to a statement issued by the NSE earlier this month.
