Singapore Exchange India Futures to Continue as Dispute Drags On

(Bloomberg) -- Singapore Exchange Ltd. and National Stock Exchange of India Ltd. will remain partners for a little longer than both anticipated.

An arbitrator deciding on a quarrel between the exchanges over Indian stock futures contracts ordered them to extend their licensing agreement beyond August, and for at least two months after the end of arbitration. It ordered SGX to refrain from offering new India equity derivatives products such as those announced by the bourse in April. Hearings on evidence in the case are expected to start in early 2019, SGX said in a statement Saturday.

The fight threatens to unravel an 18-year partnership between two of Asia’s largest exchanges and make it more difficult for international investors to hedge their exposure to India’s $2.2 trillion equity market. The Indian exchange dragged its Singapore counterpart to court last month to stop SGX launching what it viewed as copycat contracts to the licensed Nifty futures. The dispute moved to arbitration.

“This is a renegotiation process,” Harsh Wardhan Modi, an analyst at JPMorgan Chase & Co., said in a Bloomberg Television interview on Monday. “The fact that both of them are discussing it via lawyers -- but they’re still discussing it -- ultimately I don’t think this is totally finished yet.”

Futures in Doubt

The disagreement erupted when SGX decided in January to launch single-stock futures on some of India’s biggest companies. Days later, India’s three national exchanges said they would stop all overseas licensing and data deals related to their equities. In April, the Singapore bourse said it was launching the SGX India Futures to help investors transition after the end of the Nifty pact in August, even as the two discussed collaborating on a trading link.

Shares of SGX fell 0.7 percent on Monday morning in Singapore, extending their decline to 9.3 percent since the Feb. 9 decision by India’s exchanges. The benchmark Straits Times Index has fallen about 2 percent in the same period.

“Having a key product erode in such a manner is not an insignificant matter for SGX,” Goldman Sachs Group Inc. analyst Gurpreet Singh Sahi, who has a sell rating on the stock, wrote in a note late Sunday. While the interim order provides near-term relief, there’s still uncertainty over SGX’s India offering, Singh said.

Index giant MSCI Inc., Singapore’s regulator and international investors have weighed in on the fight between the exchanges.

MSCI has blasted the Indian exchanges’ move to cut off licensing ties as anti-competitive and is reviewing whether countries including India that restrict investor access should have their values in its indexes capped. The Monetary Authority of Singapore urged all parties to find an “amicable solution” and warned that a prolonged dispute would hurt international investors.

©2018 Bloomberg L.P.