With regulatory approvals in, NSE, SGX hopes to launch new

The NSE and Singapore Exchange (SGX) have received all regulatory approvals to launch SGX Connect, a new joint platform that is likely to be functional from the NSE International Exchange at Gift City in Ahmadabad towards the end of 2020. The announcement Tuesday formally ends the long bickering and an arbitration case at the Bombay High Court between the two large exchanges in Asia that traces the problem to a February 2018 statement by NSE that it would end the joint platform--SGX-Nifty-that used to trade NSE's offshore equity derivatives, from October 2018. Subsequent talks between the two did not yield any results.

Soon, the BSE had also decided to stop supplying its derivatives to its foreign partners as part of an attempt to prevent more of the domestic equity derivatives market from going offshore. In fact, the domestic exchanges were prodded by Sebi and the RBI as huge offshore volumes were leading to very high volatility in the onshore rupee and futures markets.

The move prompted SGX to seek legal remedies against NSE and in April 2018 SGX also decided to launch Indian single-stock options despite NSE's objections which further created a rift between the two and in May 2018 both the parties moved Bombay HC seeking an arbitration award. The next month, the HC asked NSE to allow its derivatives to be allowed to be traded on the SGX in the interim. In March 2019, the Bombay HC extended NSE-SGX arbitration deadline to December 31, 2020 as both the parties sought more time to settle the dispute.

It can be noted that Nifty futures contracts on the SGX were very popular among foreign portfolio investors looking to trade in dollar-denominated products and not wanting to register with Sebi. And at its peak in 2016, SGX Nifty volumes were 1.4 times higher than those on the onshore NSE platform. In February 2019 only 1.6 million contracts of SGX Nifty were traded on the futures market on SGX. SGX Nifty futures volumes are down 27 percent since February 2018, when domestic bourses first announced their plan to end data sharing and licensing pact with their global counterparts.

In February 2019, both the bourses had submitted a joint proposal to the Sebi seeking permission to resume such an arrangement. The SGX Connect aims to bring together trading on Nifty indices at IFSC and create a larger pool of liquidity comprising international and home market participants.

"This is a great opportunity to build vibrant markets at Gift City. We are working on many products to make Gift City a hub of activity for all India access products across asset classes for international investors and a gateway for home investors to access international markets," NSE managing director and chief executive officer Vikram Limaye told reporters here Tuesday. The SGX Connect, which will be functional subject to further approvals from relevant local authorities, will enable SGX and NSE IFSC members to access Nifty products and manage their exposures through their own clearing corporations.

The SGX and NSE will continue to work with all key stakeholders to make the platform operational before the end of 2020, subject to members' readiness and receiving all relevant approvals. Both exchanges are also working to discontinue related arbitration proceedings, he said. Limaye said under the proposed agreement, SGX will set up a subsidiary in Gift City, which will be used to route all trades from Singapore to the common liquidity pool in Gift City. It will give significant impetus to build the market in the Gift City.

The new platform will attract not only the participants who are in Singapore today but also broaden the market by getting more members. There would be new products which will help develop more asset classes, he said. SGX chief executive Loh Boon Chye said, "as Asia's most international and connected multi-asset exchange, SGX is committed to provide an open, single-point access to all of Asian markets to its global institutional clients." GSX's portfolio investment and risk management solutions across equities, fixed income, currencies and commodities, cover close to 100 percent of Asia's GDP, Chye said. He expressed the hope that India being an important market for international investors, the new platform and the collaboration with NSE and other stakeholders will further this market making.

Sounding confident of a smooth transition, Limaye said "we have tried to come with a structure which will be least burdensome on the existing set up and market participants. Currently, the SGX Nifty Futures average daily volume is about USD 1.8 billion while that of IFSC is USD 150 million.

"We certainly hope shifting of SGX Nifty volume to Gift City and the volume to increase thereafter," he said..

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)