Pedestrians exit an escalator that runs past an electronic screen and ticker board that indicates stock figures at the Singapore Exchange Ltd. (SGX) headquarters in Singapore. (Photographer: Bryan van der Beek/Bloomberg)

SGX To List New Indian Derivatives In June, NSE To Investigate How

The National Stock Exchange Ltd. will examine the structure and other details of the new derivative products linked to Indian equities that the Singapore Exchange plans to launch in June, Managing Director and Chief Executive Officer Vikram Limaye said.

“We will also try and talk to SGX to understand how this product is constructed and how it is going to be compliant to what the exchange has announced,” he told BloombergQuint over the phone.

The new products will replace SGX’s existing Nifty futures following a decision by India's stock exchanges to stop supporting offshore derivatives linked to their benchmark indices.

SGX announced the launch of the new products today in a press statement that said the new derivatives “will provide market participants with continuity and the ability to seamlessly transition their current India risk management exposures”.

SGX will also add to the existing India single-stock futures offering launched on the Singapore market on Feb 5., according to the statement.

While the statement is silent on the structure and reference price for these new products, given the lack of access to real time NSE data, a circular issued by the Singapore Exchange and reported by newspaper LiveMint indicates the products may be linked to the NSE Nifty 50 index.

Limaye reiterated that NSE will not provide SGX with real time price data.

We have to understand in more detail what this product structure is, how it gets priced and how it will trade. Because there are certain restrictions in terms of announcements that Indian exchanges have made. Obviously, it cannot be a violation of what we have announced.
Vikram Limaye, MD and CEO, NSE

An Effort To Reshore Liquidity

On Feb. 9, the National Stock Exchange of India Ltd., Bombay Stock Exchange and another Indian bourse said they would end all licensing agreements permitting offshore derivatives and stop offering live prices to overseas venues. The decision was aimed at discouraging offshore trading and to promote a tax-free business hub in Prime Minister Narendra Modi’s home state Gujarat.

The move was criticised by MSCI which had said that if the changes are put into effect "the result will be disruptive and harmful to international institutional investors in Indian equities."

Meanwhile, SGX said, in today’s statement, that it is still working with its Indian counterpart, the NSE, to evaluate a joint trading and clearing model in Gujarat International Finance Tec-City.

“While implementation is not feasible before the expiry of the licence agreement with NSE, SGX remains committed to engagements with NSE and other relevant stakeholders in India towards a collaboration in GIFT City,” the Singapore operator said.

Also Read: India's Attack on Offshore Markets Clobbers SGX, Risks MSCI Ire

Edited excerpts of an interview with Vikram Limaye, Managing Director and CEO, NSE

What’s the course of action now that SGX has announced that it will list new Indian equity derivatives products in June 2018?

I found out just today, as everyone else. Therefore, we are in the process of examining the structure, the product details, etc. We will also try and talk to SGX to try and understand better how this product is constructed and how it is going to be compliant to what the exchange has announced. Based on the assessment and discussion, we will have to figure out our future course of action. So, at this point of time, I don’t have more information in terms of exactly how this product works and whether it is compliant or not. 

So SGX’s derivative products may be under a different name but may follow prices on Indian exchanges. How does this work and prima facie are there no violations?

I don’t want to speculate because they have not mentioned what securities are going to be used, etc. But if they are going to use NSE prices, we will be not giving out prices on a real time basis. At the end of the day, they can take it from any website. They don’t have to take it from us. We have to understand in more detail what this product structure is, how it gets priced and how it will trade. Because there are certain restrictions in terms of announcements that Indian exchanges have made. Obviously, it cannot be a violation of what we have announced. Unless I get more detail surrounding the exact structure, how it will trade and how people would trade, it is difficult for me to comment on whether it is compliant with what we have announced or not. If it is not compliant with what we have announced, then we will have to take appropriate steps.

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