NSE-SGX Trading Link Via GIFT City Likely To Go Live By April: BQ Exclusive

NSE and SGX are working to formalise the real-time connection for offshore derivative trading through Gujarat's GIFT City.

<div class="paragraphs"><p>A pedestrian walks past GIFT Tower One, left, and GIFT Tower Two in Gujarat International Finance Tec-City. (Photographer: Dhiraj Singh/Bloomberg)</p></div>
A pedestrian walks past GIFT Tower One, left, and GIFT Tower Two in Gujarat International Finance Tec-City. (Photographer: Dhiraj Singh/Bloomberg)

India’s National Stock Exchange Ltd. and Singapore Exchange Ltd. are working to formalise the real-time connection between the two bourses by April for offshore derivative trading, according to a person aware of the details.

NSE and SGX signed an agreement in September last year to finalise the terms to make the cross-border trading link operational. That will allow overseas participants to trade in Gujarat International Finance Tec-City, a move that will help create a bigger liquidity pool for Nifty products within India.

SGX has set up its special purpose vehicles at GIFT City at the International Financial Services Centre and the exchanges are working on the connect, said the person cited above on the condition of anonymity as details aren’t public yet. The software and hardware should be in place by the end of the year and testing will begin in the January-March quarter, he said, adding that the connection is expected to be up by April 1.

An emailed query to the NSE remained unanswered.

The agreement between the NSE and the SGX paved the way to withdraw arbitration proceedings initiated after India’s largest bourse, along with domestic peers, in 2018 stopped sharing pricing data to protect index futures from shifting offshore. The restrictions evoked criticism. Even in its June 24 review, MSCI, the world’s largest index compiler, criticised Indian exchanges and the regulator for restrictive practices.

Regulators of both the countries have granted initial regulatory permissions and anti-money laundering requirements are complete, said the person cited earlier.

Once the link is live, contracts mirroring Nifty products traded in Singapore will be transferred to NSE-IFSC platform in a staggered manner. Investors registered with the NSE-IFSC will be allowed to trade in SGX products. The Indian bourse already offers a Nifty dollar-based contract in GIFT City.

The trading link includes two clearing corporations—one each in GIFT City and in Singapore. The contracts will be settled in India and transferred to SGX, allowing foreign investors to cross or transfer margins between accounts on SGX platforms after squaring off positions.

India will grandfather or exempt Singapore-registered clients from the KYC requirement. The two regulators have agreed to share investor information, said the person cited above.

Initially, existing derivatives such as Nifty 50 Futures, Bank Nifty and Nifty IT will be traded in GIFT City and later new ones will be introduced. The GIFT City will have no linkages with the domestic exchange, and both will operate as two separate liquidity pools, the person said.