SGX-NSE may start operations at Gift City by Dec: IFSCA's Injeti Srinivas

Investors will need to wait another quarter to trade in the popular global products, which will get routed to the International Financial Services Centre (IFSC). In a telephonic interview with Shrimi Choudhary, Injeti Srinivas, chairman of IFSC Authority (IFSCA), discusses the impact of Covid-19 on the operations of Gift City. Edited excerpts:

Nifty’s Singapore trades, which were supposed to move to Gift City in April, have been delayed. Why? 

SGX has incorporated a special purpose vehicle (SPV) — SGX India Connect IFSC — in February 2021. IFSCA has already issued no-objection to the SPV for opening a bank account in Gift City and for infusion of capital. Given the unique nature of the Connect, SGX has sought certain relaxations, which the IFSCA has already addressed. Since it is an SPV, it does not have a direct interface with investors. However, the IT infrastructure, which should have these products on-boarded, is under progress. We require an absolutely seamless connectivity on a real-time basis, keeping in mind the high traffic on Nifty indices at the Singapore exchange platform.

By when can we see SGX Connect begin operations? Any specific timeline?

NSE and SGX had projected that the exchange would be operational by September 2021. As I mentioned, infrastructure readiness along with the second wave of the pandemic have delayed the progress of Connect. The parties now expect exchange readiness by December 2021. Accordingly, internal testing should end in February 2022 and member testing is targeted for the first quarter of 2022.

Are the tax incentives announced in the Budget for Gift IFSC attractive enough to tap global players?

These incentives would help tap global players in the fund business, aircraft leasing and financing business. The competitive regulatory regime makes IFSC an attractive jurisdiction, particularly for fund management activities. It is expected that Gift City would soon emerge as a hub for alternative investment funds (AIFs). We have been seeing a lot of traction following incentives for the fund business. We have received two applications for registration as AIFs, which we recently granted. Another 30 funds have shown interest in shifting from offshore financial centres (including Mauritius) to Gift City. Similarly, many entities have shown interest in setting up aircraft leasing at Gift City. 

IFSCA had, last week, put out the consultation paper with respect to the bullion exchange. When could we expect the exchange to start?

The broader contours of the International Bullion Exchange (IBE) will be prepared by August 2021. This would encompass guidelines related to risk management, product composition, clearing and settlement. It will be operational by September 2021 when the pilot phase will be launched. The focus is to bring liquidity and major market participants on the exchange. Incentivisation for enabling trading at the IBE is being considered as a first step to bring large-scale traction from Day One itself. Major exchanges NSE, BSE and MCX along with the two depositories NSDL & CDSL have signed an MoU to establish a holding company by June 2021 to operate in the IBE. The exchange will bring transparency and allow only globally accepted standards of gold. Other products such as exchange-traded funds (ETFs) in gold/silver, gold saving accounts and gold accumulation plans are going to be complementary to the activities of the IBE. 

The government seems to be divided over banning cryptocurrency in the country. Where does IFSCA stand?

With respect to cryptocurrency, IFSCA will be guided by the legal position. It is imperative that IFSCA follows an open and liberal approach as far as adoption of blockchain technology is concerned. We have to compete with other global financial service centres, which are open for new technology. IFSCA has received a number of applications under its Sandbox framework. Among the applicants, quite a few have proposed to work on blockchain technology. Investors in Gift City will primarily be institutional investors and high net-worth individuals. These are sophisticated investors who have a higher risk appetite than retail investors.