NSE-SGX Gift Link to go live from 1st April

“Operations will start in a phased manner, with the first phase starting from April 1,” Srinivas said in an interview. “The SGX Special Purpose Vehicle has already been inducted, its office has been established, and the market data connect is impacted.” The technology verification is underway and is likely to be ready in a month or two.”

However, an official of an Indian regulator said that SGX has written to both the NSE and the International Financial Services Center (IFSC) authority, stating that their clients based in Hong Kong will be able to invest through the NSE IFSC-SGX link. Can’t be. regulatory restrictions.

“The letter states that approximately 40% of their clients or funds investing in India through SGX come from Hong Kong, and that the Chinese financial services jurisdiction does not allow investment in any jurisdiction, which is a bilateral agreement. or is not a signatory to an international organization. Securities Commissions (IOSCO) official,” the official said on condition of anonymity. IOSCO is a consortium of organizations that regulate the world’s securities and futures markets.

The five-year IFSC and IFSC authorities established in 2020 are not yet a part of IOSCO.

“The IFSC Authority is in the process of gaining membership in leading international fora of financial regulators. We are equally eager to enter into bilateral agreements with our counterparts across the globe,” Srinivas said. His remarks were not in the context of NSE IFSC-SGX Connect.

Emails sent to the spokespersons of NSE and SGX were not immediately responded to.

If the regulatory hurdle is not resolved by the end of March, GIFT Trading Link will begin operations without the participation of Hong Kong-based investors.

“We are not expecting all the customers to come on board on the first day. This will be done over the next four months starting in April. By August, we expect all funds and brokers to migrate to IFSC. Volume on Nifty futures in IFSC will triple in the first month itself,” said a third official, who also declined to be named. The person said the existing SGX-Nifty index and related contracts will close by August.

Initially, NSE-SGX connect will lead to more revenue for SGX than NSE IFSC. As per the revenue-sharing agreement, trades will be settled on the exchange from where it originates.

“Since the majority of clients will be from Singapore, trades are likely to be settled on SGX, and thus, they will earn the bulk of the revenue share,” the person said.

In February 2018, NSE stopped providing data feeds to foreign exchanges, including SGX, arguing that it was losing a major source of revenue, liquidity and relevance to overseas markets. This barred investors in Singapore from accessing NSE’s real-time data, thereby restricting their ability to invest in Indian securities through SGX. This led to a rift in their almost two decade old relationship. The dispute went to courts, but different partners smoked the peace pipe in 2019, deciding to jointly launch Nifty index-based derivative products at GIFT IFSC. GIFT City is at par with Singapore, Dubai and Hong Kong in terms of taxation.

According to the latest data, the open interest on the SGX-Nifty is almost four times the open interest on the Nifty 50 index. On an average, SGX generated almost double the daily Nifty futures volume as compared to NSE. SGX has a market share of over 52 per cent in Nifty futures. This is because the lot size of the contract on SGX is too large 27.36 lakhs.

A third official said that the data connectivity between the two exchanges in GIFT will be established by the vendor Tata Consultancy Services Ltd by the end of the month.

Another issue that could pose problems for the launch of GIFT City is the geopolitical concerns surrounding China and Hong Kong. India is closely monitoring foreign flows in both direct and portfolio investments from both the jurisdictions.

“It is something for the regulators and the government to decide. Even today Hong Kong funds are investing through SGX-Nifty. They hold Indian FPI registration,” said another official.

Indian laws require the identity of the end customer, while Singapore depositories and exchanges do not have direct access to the identity of individual customers. To bridge the differences, the rules for IFSC-based exchanges and entities were changed to liberalize end-beneficiary disclosure with the caveat that Singapore would be able to provide such information when requested by the IFSC authority.