Mumbai/Singapore:¬†Singapore‚Äôs exchange may have a shot at keeping its lucrative India index futures, as long as it can meet the desire of Prime Minister Narendra Modi‚Äôs government to keep investor activity within the country‚Äôs borders.
The bourse is discussing a trading link with the National Stock Exchange of India Ltd that would make Singapore a gateway to the NSE‚Äôs derivatives market in Gujarat, Modi‚Äôs home state, said NSE chief executive officer Vikram Limaye. An agreement would allow Singapore Exchange Ltd to replace some of the business it‚Äôs set to lose after NSE cancelled a licensing deal that allowed derivatives linked to the Nifty 50 Index to trade in the city-state.
‚ÄúWe had discussions earlier about a derivatives connect,‚ÄĚ Limaye said in an interview on Wednesday. ‚ÄúThat is a process that will resume and we will see how the discussion evolves. There is no reason why we cannot consider the proposal.‚ÄĚ
Indian exchanges said on 9 February that they were scrapping all overseas licensing deals and data feeds to foreign venues, the latest attempt to discourage offshore trading and promote the Gujarat International Finance Tec-City. The tax-free business hub created by Modi, a former chief minister of Gujarat, was designed to rival international financial centres.
SGX‚Äôs shares fell more than 7% on Monday as investors reacted to the announcement, which could mean a cut of at least 4% to SGX‚Äôs total revenue, according to Sharnie Wong, a Bloomberg Intelligence senior industry analyst.
A trading link between Singapore and Gujarat would broadly resemble the connection between Hong Kong and exchanges in Shanghai and Shenzhen, which provides access to China via the former British colony. The system means investors operate within the mainland‚Äôs capital controls and ensures all trading is on Chinese venues.
While talks have previously taken place, NSE‚Äôs 9 February action created greater urgency for SGX officials to consider some sort of tie-up in India, according to people familiar with the matter. The link, in which buy and sell orders from SGX‚Äôs customers would be routed to NSE‚Äôs IFSC Ltd exchange, would be tax-free and offer contracts in dollars, said Limaye.
An SGX representative declined to comment. In a statement on Sunday, the exchange said it would work with NSE ‚Äútoward solutions for global investors, including developing solutions from NSE‚Äôs IFSC.‚ÄĚ
The decision to scrap India‚Äôs overseas licensing deals came days after the Singapore exchange launched Indian single-stock futures despite opposition from NSE, with whom it signed a pact in 2000.
Limaye said he‚Äôd called Loh Boon Chye, SGX‚Äôs CEO, in an effort to prevent the 5 February start of the single-stock futures, which are not subject to the agreement between the exchanges.
‚ÄúWe were surprised by SGX going ahead,‚ÄĚ Limaye said. ‚ÄúOur concerns were shared, that ‚Äėplease don‚Äôt do it or this will precipitate action.‚ÄĚ‚Äô
SGX may seek to buy a stake in NSE‚Äôs IFSC exchange, either alongside a trading link or instead of one, according to the people familiar with its deliberations, who asked not to be named because talks are private. Limaye said there hadn‚Äôt been any discussions about a purchase.livemint