The CNX Nifty futures trading volume on the Singapore Stock Exchange (SGX) recorded a 762 per cent rise in 2008, while the same for other Asian indices grew by a mere 16-24 percent, data released by SGX on Tuesday showed.
In fact, the data showed that Nifty futures generated 20 per cent volume on SGX out of the total 62 million contracts of Asian indices traded on the exchange. On an average, 12.43 million contracts of Nifty futures were traded in 2008 on SGX compared to 1.44 million contracts in 2007.
The Nifty covers about 23 sectors of the Indian economy and over 60 per cent of the total market capitalisation of the underlying bourse, the National Stock Exchange (NSE). Apart from the futures of the Indian benchmark index, other Asian indices whose futures were traded on SGX included MSCI Taiwan Index, Nikkei 225 Index and MSCI Singapore.
| FOLLOW THE LEADER Number of contracts traded of Asian futures index listed on SGX | |||
| Total volume | 2007 | 2008 | % growth |
According to market experts, volumes from domestic markets had shifted to Singapore after India banned participatory notes (PNs) in September 2007 to restrict flow of unaccounted money. The ban, however, was lifted in October 2008 after markets crashed and touched historic lows and foreign funds dried up. Short-selling of Nifty futures on SGX was high in 2008 and traders decided the market trend there.
Following the swift rise in Nifty futures volume on SGX, NSE has been advocating a change in trading hours and trying to match it with that of the Singapore market. However, local traders have been opposing this on the ground that if the move goes through, it will result in hectic working hours.
“Volumes are not likely to shift to the Indian shores in a hurry as traders are more comfortable in Singapore due to less disclosure norms. Apart from this, some of the top Indian punters too are not willing to get their money back into India as they have the means to generate returns outside,” said a Singapore-based foreign fund manager.
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According to market players, SGX is becoming more like a single-point trading hub for all Asian markets as index futures of all major Asian countries are listed on it. “SGX to equity traders is what the non-deliverable forwards (NDF) market is to currency traders. Big traders can decide the direction of Asian markets form one point. But the only difference here is that NDF is not a regulated market, whereas SGX is one with not so stringent disclosure norms,” said the fund manager.
The SGX data also show that there has been a significant increase in trading volumes of exchange-traded funds (ETFs) on the bourse. Interestingly, the Barclays Global Investors (BGI) and Citigroup-managed iShare MSCI Indian ETF, the first pure-play index fund offering exposure to the Indian market, is also listed on SGX along with other Asia-focused ETFs.