Home / Financial Services/ Indian bourses to stop licensing index, stock prices to foreign exchanges

Indian bourses to stop licensing index, stock prices to foreign exchanges


Comments / {{hitsCtrl.values.hits}} Views / Monday, 12 February 2018 00:00


MUMBAI (Reuters): India’s three main stocks exchanges said on Friday they would stop licensing their indexes and securities or providing data to foreign exchanges, saying such agreements had led trading to migrate outside of the country.

Foreign markets now offer dollar-based derivative contracts based on Indian indexes, shares and other securities under licensing agreements with Indian exchanges, allowing overseas investors to gain exposure to Asia’s third-largest economy without having to trade onshore.

Those licensing agreements will now be terminated with immediate effect, subject to notice periods, the National Stock Exchange, BSE Ltd and Metropolitan Stock Exchange said in a joint statement late on Friday.

The most popular of these contracts has long been the SGX Nifty 50 index futures offered by the Singapore Exchange under a licensing agreement with the National Stock Exchange, India’s biggest exchange. It tracks the NSE’s main index of its top 50 shares, the Nifty 50 index.

The actions would prevent SGX from offering the contract to overseas investors, who would be forced to unwind contracts and buy into domestic derivatives to gain exposure to India, a country that has become an emerging market darling, but has had disputes with foreign funds over taxes and regulations.

“The volumes in derivative trading based on Indian securities including indices have reached large proportions in some of the foreign jurisdictions, resulting in migration of liquidity from India, which is not in the best interest of Indian markets,” the Indian exchanges said in the statement.

The latest move will not apply to exchange-traded funds or similar products, the three stock exchanges said.

Although foreign investors have pumped more than $77 billion into India since 2012, exchanges have long felt they are missing out, because derivatives have been popular in Singapore, which is seen as offering lower tax and a more certain regulatory regime.

The action comes as SGX this week introduced trading in single-stock futures contracts for Nifty 50 components, which had raised fears it would significantly take away liquidity from India. SGX had previously focused on index derivative contracts.

In a statement late on Friday, SGX said it would “take all measures to maintain orderly trading and clearing of SGX India equity derivatives.”

The exchange added it would also work to develop “viable solutions for international investors into India,” including exploring opportunities in a financial centre India is keen to develop in the Western state of Gujarat.

 


Share This Article


DISCLAIMER:

1. All comments will be moderated by the Daily FT Web Editor.

2. Comments that are abusive, obscene, incendiary, defamatory or irrelevant will not be published.

3. We may remove hyperlinks within comments.

4. Kindly use a genuine email ID and provide your name.

5. Spamming the comments section under different user names may result in being blacklisted.

COMMENTS

Today's Columnists

Relevance of brand valuation?

Thursday, 22 November 2018

Another iconic global business leader has been exposed. Greed, both personal and corporate, it seems is the root cause. This mirrors the conduct of many political leaders around the world. Is it time to have much greater checks on CEOs, may be power-


JVP and minorities: Towards a third way

Thursday, 22 November 2018

As Sri Lanka moves toward a political show down between the UNP and SLFP/SLPP traditional political rivals, there is a third force with great potential strength emerging as a decider in any final outcome, provided that force remains united. By this


Reaching global quality standards through Deming Award

Wednesday, 21 November 2018

The importance of quality in the contemporary competitive business environment cannot be over-emphasised. Total Quality Management (TQM)is a company-wide, all pervasive management philosophy, which organisations globally, in many business sectors hav


Ramsar accreditation of Colombo Wetlands: Rebranding Colombo as a Wetland City

Wednesday, 21 November 2018

Colombo, once known to be “kolonthota,” has always been identified as a wetland complex at the heart of the Kelani river delta. Today this city is increasingly drying up, with around 20 sq km left as wetlands which continue to be threatened every


Columnists More