NS National Stock Exchange (NSE) through its GIFT City branch International Financial Services Center (IFSC) has come up with new facilities in Gujarat that will enable investors to buy and sell US stocks. NSE International Exchange, a wholly owned subsidiary of India’s NSE, announced that US stock would be available for trading. This means that Indian investors can now buy and sell stock in companies such as Apple, Google, Microsoft and other majorly listed US entities. The offer will be in the form of unsponsored depository receipts.
Similarly, IFSCA has also facilitated this under regulatory sandbox. With this new change, the entire transaction process of the above US shares will come under the authority of the IFSC body. This includes overseeing trading, clearing, settlement and even holding of US stocks. The move is the first of its kind in India, which has been tried under the liberalized remittance scheme limits set by the Reserve Bank of India. This will enable investors to transact exclusively from the retail sector through the NSE IFSC platform.
The advantage here is that thanks to the business model under the NSE IFSC being implemented, it gives two new opportunities to Indian investors. One is that these investors get to make additional investments, and the other is that the business model and platform make the investment process low-cost.
This arrangement would now allow investors to have partial ownership of US stocks. Having said that, these investors will be able to keep their depository receipts in their own demat accounts, which were opened in Gift City And as per a press release, the corporate action relating to the underlying stock shall be entitled to receive the benefit.
Tapan Ray, MD & Group CEO, GIFT City, said, “Gift City is emerging as a country’s financial gateway for investment in India and globally. GIFT City has a rapidly growing ecosystem of international banks, international exchanges and capital market intermediaries. This is the right time to get such an innovative product especially from the Indian perspective; We have seen Indians start investing in global stocks. We congratulate NSE IFSC for this new endeavor and wish them great success.”
Investors will also be provided with the option to trade the said fractional volume against the underlying shares in the US market. This approach is believed to be an important part of the process’s affordability.
NSE IFSC Clearing Corporation Limited (NICCL) will offer robust risk management framework to its investors and it will reportedly help in facilitating clearing and settlement of all trades in depository receipts. It will also provide settlement guarantee for all trades made through the platform. Investors have an additional layer of protection in this process as they come under the investor protection framework of NSE IFSC.
Prior to all these changes, Indian investors looking to buy US stocks did so through specialized online brokers that had authorization from both Indian and US regulators. These brokers allow ownership of up to one millionth of US stock. The concept of fractional ownership was popular even before this new scheme.
Vikram Limaye, MD & CEO, NSE said, “This will be an innovative product, and a significant milestone for NSE IFSC which will expand the product coverage of the exchange beyond existing customers. This product will be under the LRS framework of RBI. Enables resident individuals to easily and cost-effectively invest in US stocks (which allows resident individuals to remit up to USD 2,50,000 per fiscal year for any permitted current or capital account transactions). With the guidance of the IFSC Authority and the support of all the key stakeholders involved, we look forward to rolling out this product very soon.”
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