SEBI Chief Says Stopping Offshore Derivatives Of Indian Stocks, Indices Not Retrograde
“Exchanges’ move to stop derivatives of local stocks, indices on overseas bourses was driven by business concerns.”
India's market regulator said domestic exchanges' move to stop derivatives of local stocks and indices on overseas bourses was driven by business concerns.
It's a commercial decision, not a retrograde step, Securities and Exchange Board of India Chairman Ajay Tyagi told reporters in New Delhi at after an address by Finance Minister Arun Jaitley to SEBI's board members and top officials.
India’s largest National Stock Exchange, Asia’s oldest Bombay Stock Exchange, and Metropolitan Stock Exchange agreed to stop sharing data with overseas bourses that offer index and stock futures to prevent trading volumes from moving offshore. Such contracts are used by foreign interests to hedge their positions in the cash segment. The immediate threat came from Singapore Stock Exchange's decision to offer Nifty 50 single-stock futures that contribute a third of futures volumes on the NSE.
NSE has a licensing arrangement with SGX for dollar-denominated index futures linked to Nifty 50, Nifty Bank, I.T., CPSE and Midcap 50 indices and Nifty 50 options, according to its draft prospectus filed in September 2016. NSE also has derivatives benchmarked to Nifty indices with the Chicago Mercantile Exchange, the Osaka Exchange and the Taiwan Futures Exchange.
BSE will also have to terminate its arrangements with BRICS Exchanges Alliance. It also has tie-ups to offer derivatives on stock and futures exchanges in Brazil, Russia, Hong Kong and South Africa. In addition, options and futures based on the S&P BSE SENSEX are also listed and traded on Eurex and the Dubai Gold and Commodities Exchange.
'Opportune Time For LTCG'
Tyagi backed the government's decision to reintroduce long-term capital gains tax on equities. ''Markets are booming and it’s opportune time to levy LTCG, " he said. “SEBI has not received any representation from investors so far on LTCG.”
Finance Minister Arun Jaitley in Budget for 2018-19 brought back the levy after 13 years. Gains of Rs 1 lakh or more on sale of stocks held for over a year will be taxed at 10 percent from April 1.
Yet, it will be wrong to say long-term capital gains tax will have no impact at all on Indian markets, Tyagi said. Any impact would be small and the global factors pose bigger risks.
As market experts debate the fairness of the tax, the bigger worry is its possible impact on long-term equity investments. The benchmark S&P BSE Sensex is down a little over 7 percent from its January high, as investors grapple with the double-whammy of a global sell-off and tax concerns.
Tyagi said the volatility in Indian markets may continue for some time due to global reasons but investors need not be concerned regarding safety and security of the Indian markets.