 "Gold exchanges promise pricing transparency")
The International Financial Service Centre coming up at GIFT City near Ahmedabad might soon get another high-profile international exchange. Dubai Gold and Commodities Exchange (DGCX) is planning to set up shop there.
The exchange sector in general is gearing up for launching their operations once relaxations in the Companies Act and setting up of dispute resolution mechanisms is operationalised. DGCX is understood to have held a meeting with the GIFT-IFSC authorities and sought more information after the Union Budget.
A DGCX spokesperson declined to comment. It was set up 12 years ago by Financial Technologies India and the Multi Commodity Exchange (MCX); the former has since exited. DGCX is the only exchange abroad which offers futures in the rupee-dollar. Its other major products are commodities, including gold. Early this year, they'd launched equity futures. Rupee-dollar and gold futures are among their top traded contracts.
On January 15, DGCX launched an equity product segment by offering 15 single stock futures on blue-chip US stocks like Facebook, Google, Apple, JP Morgan and Microsoft. Ten Indian stocks were part of this launch -- Axis Bank, Tata Motors, Tata Consultancy Services, Infosys, Reliance, HDFC Bank, State Bank of India, ICICI, Larsen & Toubro and Maruti Suzuki.
The exchange also has gold spot contracts. This could be an attraction for Indian players, which can trade in the international market. There is no spot contract for gold in India till the proposed BSE-IBJA exchange starts functioning.
BSE, oldest stock exchange in India, has also firmed up plans for setting up an international exchange with Deutsche Bourse. DB is already an equity partner with BSE. However, the National Stock Exchange, which has signed an agreement with the London Stock Exchange for a GIFT-IFSC venture, might have to review that as DB is now acquiring LSE. MCX has tied up with the CME group for a GIFT venture.
On Thursday, the Securities and Exchange Board of India (Sebi) said 'commodity derivatives' shall be eligible as a security for trading and stock exchanges operating in the IFSC may permit dealing in these. The clarification was required as the Forward markets Commission is now merged with Sebi; when the norms for exchanges in GIFT were issued a year before, it was the futures regulator.
India's two big general insurers, General Insurance Corporation (GIC) and New India Assurance Company, have already sought licences from the Insurance Regulatory Development Authority of India (Irdai) to operate in IFSC. G Srinivasan, chairman of New India Assurance, said: "We want to have big offshore re-insurance business with foreign companies, which we gradually want to bring to IFSC."
New India is going solo at GIFT. It can also offer re-insurance business to Indian companies, subject to regulatory clarity. Srnivasan said the better infrastructure at GIFT and the tax incentives announced in the Union Budget would make the business attractive.
GIC, it is reported, also plans to offer re-insurance at IFSC. Both insurers are expecting the Irdai licence in the near future. Globally, there are finance centres having niches for particular financial services, such as Zurich for private banking or Hamilton (Bermuda) for re-insurance.
In 2013, the global insurance premia was $4.9 trillion and is expected to grow at 18% annually till 2018, according to data from IFSC-GIFT. The study says there is an opportunity loss of $4.9 bn as fees which can come to Indian shores in IFSC if one% of global business is captured.
IFSC ventures are exempt from service tax, a major relief as foreign re-insurance companies don't reimburse service tax to Indian companies. With this, even insurance brokers are also said to be planning to start operations from GIFT, according to a highly placed official.
Even banks are making plans for IFSC at GIFT. State Bank of India, largest public sector bank, has a huge offshore business with branches across world. "SBI will be able to make GIFT a hub for their offshore business," said a sector official.
