Mumbai: The move by Indian exchanges to stop licensing their indices and securities to overseas bourses has come under the attack of Washington-based Futures Industry Association (FIA). The international trade body for derivatives markets said the decision will likely disrupt trading on exchanges worldwide and alarm institutional investors. The decision, which was announced in a joint communication by the National Stock Exchange of India (NSE), the Bombay Stock Exchange (BSE) and Metropolitan Stock Exchanges on Friday led to shares of the Singapore Exchange plunging as much as 9% on Monday in the island nation.
NSE, India's largest exchange, has a contract with SGX that allows futures and options on the Nifty to trade in Singapore. This agreement is set to end in August, said SGX in a separate release.
"Last Friday's announcement raises serious concerns for FIA members," said the association in a release. "We look forward to discussing this announcement with the Indian exchanges and working with our members to more fully understand the consequences for derivatives markets and their customers."
The step by Indian exchanges to scrap the licences could be aimed at energising activity in the recently launched Gujarat International Finance Tec (GIFT) City, the government's ambitious project.
Foreign investors wishing to bet on the Nifty without registering with the Securities and Exchange Board of India (Sebi) trade in SGX Nifty futures. In addition to cheaper costs and lower taxes, the volumes in Nifty futures in Singapore are higher. Analysts said the open interest in SGX Nifty is 70-75% more than total open interest of Nifty futures on the Nifty.
SGX, in its release on Sunday, said it will work with the NSE towards solutions for global investors, including developing solutions from NSE's International Exchange in GIFT city. "SGX will develop and launch new India-access risk management solutions to allow global participants in SGX India equity index family of derivative products, to execute their investment activities with continuity," it said.
Source : economictimes.indiatimes.com