The trading of Nifty futures contracts on the Singapore Exchange (SGX) will begin on July 15 at the International Financial Service Centre (IFSC) in Gandhinagar. Prime Minister Narendra Modi will inaugurate the India International Bullion Exchange (IIBX) and launch dollar-denominated Nifty futures at the Gujarat International Finance Tec (GIFT) City.
“It’s a soft launch of SGX Nifty Futures on the GIFT-IFSC,” a person in the knowledge of the development told. According to the report, initially, during the first few months, SGX Nifty Futures will be traded simultaneously on GIFT-IFSC and SGX. Later, SGX will discontinue the trading of the product from Singapore.
National Stock Exchange and SGX have formed a Special Purpose Vehicle (SPV) called ‘NSE International Financial Service Centre (IFSC) SGX Connect’ to launch the products at Gift City. According to reports, SGX Nifty Futures will be traded at GIFT City for nearly 19 hours per day.
What is SGX Nifty?
SGX Nifty, also known as a Singapore Nifty, is a futures contract traded on the Singapore Exchange. The settlement of futures contracts is based on the NIFTY settlement price on the Indian stock exchange NSE. This allows international investors to bet on Indian markets without having to set up or register an entity with Indian authorities. Investors can hedge their bets at any time because the SGX allows for 24-hour trading via aftermarket trades. Furthermore, it is regarded as a good predictor of where the Indian market will open the following day, so many traders monitor it to see how the SGX Nifty is performing.
SGX initiated legal proceedings against NSE after the latter terminated its agreement with the Singapore-based exchange. In 2018 India’s stock exchanges decided to stop licensing their indexes from August 2019 to foreign bourses amid concerns over flight of trading to Singapore. The two exchanges withdrew proceedings after entering into an agreement for a connectivity pact at GIFT City. Nifty futures volumes in Singapore at 80 per cent higher than in India.
In the year 2021, the average daily volume on NSE was Rs 14,500 crore compared to Rs 26,000 crore in SGX. Foreign portfolio investors (FPIs) had shifted their positions to Singapore due to more favourable taxation and preference for a dollar-denominated product.
Move to Benefit Foreign Investors
“SGX Nifty, which is a derivative of the Indian Nifty index, pulls in 80% more volume than the local index futures,” said Sonam Srivastava, Founder at Wright Research. Bringing that volume to India by bringing the SGX Nifty to the GIFT city is an excellent move to attract foreign capital to India. SGX, which initially opposed the move, is now working with GIFT City on a connectivity agreement. Along with bringing volumes to India, trading on Gift City would benefit foreign investors, who would benefit from a minimum alternate tax (MAT) of 9% and stamp duty and tax exemptions.
GIFT City is a planned business district in Gujarat, India. It is the new business destination offering a competitive edge to Financial services and Technology related activities. Integrated development with the Walk to Work concept adds immense value to the business activities. The government has also slashed taxes at the GIFT city to compete with regional finance hubs like Singapore, Dubai, and Hong Kong.
Also inaugurate India International Bullion Exchange
Prime Minister Modi will also be inaugurating 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). About 60 qualified jewellers have already been taken on board.
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