NSE and SGX end arbitration; will trade Nifty products at GIFT City

The country’s premier bourse National Stock Exchange (NSE) and the Singapore Exchange (SGX) have entered into a formal agreement to cement the key terms for operationalising the NSE IFSC-SGX Connect. 

This will bring together international and Gujarat International Finance Tec-City (GIFT City) participants to create a bigger liquidity pool for Nifty products in GIFT City. 

Both NSE and SGX will also withdraw arbitration proceedings. The two were engaged in arbitration proceedings under the Arbitration and Conciliation Act over the trading of Nifty products for more than two years. 

The dispute was triggered after the NSE decided to terminate the Nifty trading pact with the SGX in February 2018. Also, the Singapore bourse's subsequent decision to launch identical India products became a bone of contention.

The BSE, the NSE, and the Metropolitan Stock Exchange (MSE) had jointly decided to cancel their licensing agreements with overseas bourses on offshore derivative contracts. The move was aimed at putting an end to offshore derivatives trading in Indian securities, which were gathering pace on platforms, such as the SGX.

Last year, however, the SGX and the NSE started working on a solution to route SGX Nifty trading volumes through GIFT City. 

The two exchanges have recently received regulatory clarifications from relevant authorities on the implementation of the Connect. They had received consent from their respective statutory regulators on the proposed Connect model last year. 

Both parties will continue to work with key stakeholders to develop the infrastructure for the Connect and ensure member readiness before its implementation, the two exchanges said in a joint press release. 

Vikram Limaye, managing director and chief executive officer of the NSE, said the Connect is one of the key developments for the integration of the GIFT City ecosystem with international financial markets and will lead to the development of vibrant and liquid markets for India-access products at GIFT City.  “The Connect will broaden the international and domestic participant base and further strengthen the capital market ecosystem in GIFT City, resulting in more broad-based development across asset classes and capital-raising activity,” said Limaye. 

 “Building connectivity across international platforms in Singapore and India will facilitate unfettered access for global market participants, and, in turn, enhance investments and capital market flows between India and the world. As Asia’s pioneering central counterparty, the SGX will work with the NSE and stakeholders to develop a connectivity infrastructure that incorporates international best practices and creates new value for existing and new customers. We look forward to broadening participation and deepening liquidity in Nifty products for international participants, as part of the growth of GIFT City,” said Loh Boon Chye, CEO, SGX. 

Currently, the SGX Nifty has open interest of $3-5 billion. Initially, the two exchanges may launch SGX Nifty futures at GIFT City, and then other products can follow. 

Injeti Srinivas, chairman, International Financial Services Centres Authority, said the NSE-SGX Connect for funnelling trading in NIFTY products at SGX to GIFT IFSC is an important joint financial market initiative by India and Singapore. “This will certainly give a boost to the IFSC ecosystem and promote larger participation in IFSC. The Connect creates a win-win situation for both sides, which makes it possible to have a sustainable and growing partnership between the NSE IFSC and SGX,” said Srinivas.