$7.5 bn derivative trade shifts to India as SGX feud comes to end

By Ashutosh Joshi and Ishika Mookerjee

Derivative contracts with a notional value of about $7.5 billion traded in Singapore will shift to India as a cross-border trading link between the two Asian countries’ top bourses gets fully operational on Monday.

 

SGX Nifty, the Singapore Exchange Ltd.-traded futures on India’s key equity NSE Nifty 50 Index, will be known as GIFT Nifty from July 3, and all outstanding orders will be transferred to the GIFT City, the new financial hub in the western Indian state of Gujarat.

The switch from SGX to the NSE International Exchange at GIFT or Gujarat International Finance Tech-City also highlights partial success of the Prime Minister Narendra Modi-led administration’s attempts to attract India-centric trading that had moved to global financial centers such as Dubai, Mauritius and Singapore to its shores.

“We are expecting the liquidity pool to grow as all orders from Singapore will be routed into our platform while local brokers from IFSC can also trade,” said V. Balasubramaniam, chief executive officer of NSE IX Ltd., a unit of National Stock Exchange of India Ltd. “Contracts having open interest of about $7.5 billion are getting switched.”

The move fully settles a five-year old feud between National Stock Exchange of India Ltd. and Singapore Exchange over the latter’s plan to introduce single-stock futures trading on shares of some of India’s largest companies as India sought to develop its equity market. The dispute was resolved amicably after briefly entering a legal battle. 

Nifty derivative contracts were the second-biggest contributors to SGX’s equity-derivative volumes after SGX FTSE China A50 Index futures in the fiscal year 2022, and helped expand the bourse’s revenue from higher average fees and volumes.   

SGX and Nifty will be splitting costs and revenues “roughly 50-50,” Michael Syn, SGX’s head of equities, said in an interview. The trading of futures and options will happen in the GIFT City while SGX will do the clearing, he added.

To begin with investors can access derivative products, including GIFT Nifty 50 and GIFT Nifty Bank, and gradually other indices will be introduced, NSE said in a statement earlier this month.