Singapore Exchange to launch new Indian derivatives before NSE deal ends

Tuesday, 20 February 2018 00:00 - - {{hitsCtrl.values.hits}}

(Reuters) - Singapore Exchange Ltd (SGX) said on Monday it will launch successor products to its flagship Indian equity index derivatives before the bourse’s licence agreement with the National Stock Exchange of India (NSE) expires in August 2018.

The move comes days after India’s three main bourses unexpectedly announced they would stop licensing their indexes to overseas exchanges, news which hit SGX’s shares as brokers cut the bourse’s earnings estimates.

“Our successor products will provide certainty and continuity for our clients. At the same time, we continue to work with NSE to create a larger pool of liquidity comprising international and home market participants,” Michael Syn, head of derivatives at SGX said in a statement.

Over the past two decades, SGX has become the most popular way for foreign investors to bet on Indian equity indexes with Nifty 50 futures tracking the NSE’s main index.

“We view the announcement of the successor products to SGX Nifty family of products as a positive development to the chain of events which unfolded last week,” analysts at DBS Group Research said in a report on Monday.

“The successor products, though not as well-established as the SGX Nifty family of products, will continue to allow access into Indian markets and feed demand for Indian offshore products,” DBS Group Research said.

SGX’s Indian equity derivatives products account for about 12 percent of its total derivatives trading volume. Over the last few years, the exchange has rapidly expanded its suite of derivatives that have helped to power growth in earnings while its cash equities business weakened.

Last week, global index provider MSCI Inc “strongly” suggested to the Indian exchanges and their markets regulator that they reconsider their “anti-competitive measures.”

SGX said that along with the NSE, it will also develop a link that will allow global market participants to trade on NSE’s international exchange in the western Gujarat state, where India is developing a new financial centre and offering dollar-based derivative contracts and lower taxes.