Tidal shift: BSE hoists the sails for Sensex's 'offshore' voyage

IFSCA's July nod opens the route for derivatives on the 30-share index: Sources

Tasting success with the relaunch of Sensex derivatives in the onshore market, BSE is preparing for the ‘offshore’ debut of its 30-share index, which has become synonymous with the domestic markets.

Sources familiar with the development said that the India International Exchange (India INX), a subsidiary of BSE, received approval in July from the International Financial Services Centres Authority (IFSCA) to launch Sensex 30 derivatives contracts.

IFSCA is the unified regulator for Gujarat International Finance Tec International Financial Services Centre (GIFT IFSC), India’s first and only global financial hub.

BSE has conducted several outreach programmes in the United Arab Emirates and other Asian countries to engage with trading members and establish a trader base ahead of the expected launch in the next two to three months, sources added.

Emailed queries to BSE and IFSCA did not receive a response.

Market experts believe that Sensex derivatives in IFSC will provide broader opportunities for hedging and arbitrage trades, given their growing popularity in the domestic market.

Currently, there are over 60 trading members and 19 clearing members registered on the NSE International Exchange (NSE IX).

According to its annual report for 2023-24 (FY24), BSE has thus far invested Rs 162 crore in India INX and Rs 145 crore in India International Clearing Corporation. However, India INX’s annual revenue for FY24 was Rs 55.4 lakh, while it incurred a loss of Rs 54.7 lakh.

At present, India INX offers derivative products based on the India 50 Index, Gold Futures, and INR/USD Futures. The notional trading turnover of India INX’s derivatives for FY24 was $306 billion, according to the annual report.

With this launch, BSE will compete with the National Stock Exchange (NSE) in IFSC, which currently holds a near-monopoly with its GIFT Nifty.

Last July, SGX Nifty was migrated from the Singapore Exchange to NSE IX in GIFT City and rebranded as GIFT Nifty. The full-scale operations of GIFT Nifty were launched to attract foreign investors to migrate trading to India and reduce risks.

Volumes on GIFT Nifty have grown exponentially, recording an all-time monthly turnover of $100 billion in August.

With contracts traded for nearly 22 hours a day, GIFT Nifty has become popular for providing insights into domestic market reactions to global developments during off-market hours. They also offer indications for domestic market openings. The onshore equity and equity derivatives market operates between 9.15 am and 3.30 pm.

Having had a minimal market share 18 months ago, BSE’s share of the total derivatives turnover has now exceeded 20 per cent, emerging as a formidable competitor to NSE.

Industry players suggest that to replicate its success in GIFT City, BSE will need to establish a partnership akin to the one between SGX and NSE. Both exchanges will also compete for companies looking to list in GIFT City, with IFSCA finalising norms for direct listings.

An official from IFSCA informed Business Standard at a financial summit that the regulator has observed interest from domestic companies, and the first draft documents may be filed within a quarter.