nifty Futures contract trading on the Singapore Exchange (SGX) will commence from Friday at the International Financial Services Center (IFSC) in Gandhinagar. Prime Minister Narendra Modi Will launch and inaugurate dollar denominated Nifty futures India International Bullion Exchange (IIBX) at Gujarat International Finance Tec (GIFT) City.
“This is a soft launch of SGX Nifty futures on GIFT-IFSC,” a person privy to the developments told ET. According to the report, initially, GIFT-IFSC and SGX will be traded in SGX Nifty Futures during the initial few months. Later, SGX will cease trading the product from Singapore.
A Special Purpose Vehicle (SPV) ‘NSE International Financial Service Center (IFSC) SGX Connect’ has been formed by National Stock Exchange and SGX to launch the products at GIFT City. SGX Nifty futures will reportedly be traded around 19 hours a day at GIFT City.
What is SGX Nifty?
SGX Nifty, also known as Singapore Nifty, involves taking a position on the Singapore Exchange on futures contracts. The futures contracts settlement is based on the Nifty settlement price on the Indian stock exchange NSE. It gives the flexibility to international investors to bet on the Indian markets without having to set up or register the entity with the Indian authorities. Since SGX allows 24-hour trading through after-market trades, investors can hedge their bets at any time. At the same time, it is also considered a good indicator of where the Indian market will open next day, which is why a lot of traders follow it to check how SGX Nifty is doing.
SGX initiated legal proceedings against NSE after terminating its agreement with the Singapore-based exchange. In 2018 India’s stock exchanges decided to stop licensing their indexes to foreign exchanges from August 2019 amid concerns over the flight of business to Singapore. Both the exchanges withdrew the proceedings after they entered into an agreement for a connectivity agreement at GIFT City. Nifty futures volume in Singapore is 80 per cent higher than in India.
In the year 2021, the average daily volume on NSE was Rs 14,500 crore as compared to Rs 26,000 crore in SGX. Foreign portfolio investors (FPIs) had shifted their positions to Singapore due to more favorable taxation and preference for dollar-denominated products.
Proceed for the benefit of foreign investors
Sonam Srivastava, Founder, Wright Research, said, “The SGX Nifty which is a derivative of the Indian Nifty index draws 80 per cent more volumes than the local index futures. Hence bringing that volume into India by bringing the SGX Nifty to GIFT City will help foreign capital. A great move to bring to India. SGX, which had initially opposed the move, is now collaborating with GIFT City with a connectivity agreement. Foreigners from trading on GIFT City to bring volume to India as well Investors will benefit, who can enjoy a minimum of 9 per cent alternate tax (MAT) and exemptions related to stamp duty and tax.
GIFT City is a planned business district in Gujarat, India. It is the new business destination providing a competitive edge for financial services and technology related activities. Integrated development with walk to work concept adds immense value to the business activities. The government has also cut taxes in GIFT City to compete with regional finance centers such as Singapore, Dubai and Hong Kong.
Prime Minister Modi will also inaugurate the India International Bullion Exchange, which is jointly owned by NSE, Multi Commodity Exchange (MCX), India INX International Exchange, National Securities Depository (NSDL) and Central Depository Services (India). Around 60 qualified jewelers have already been taken on board.
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