The three Indian stock exchanges — the BSE, the National Stock Exchange (NSE) and the Metropolitan Stock Exchange (MSE) — have taken a joint initiative to stop trading of derivative contracts based on Indian indices on overseas bourses.
The joint action assumes significance as the last few years have seen a huge jump in the trading of Nifty contracts on the Singapore Exchange (SGX). While derivative contracts based on Nifty are traded on SGX, Sensex-based contracts are available for trading on Dubai Gold and Commodities Exchange.
“Exchanges or their subsidiaries/group entities or any other entity having licencing arrangement with exchanges shall not license/provide Indian Indices and/or the data including the price of Indian securities to any foreign exchange and/ or trading platforms for trading or settling derivatives in any form in a foreign jurisdiction,” said a joint statement issued by the three Indian exchanges.
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‘Migration of liquidity’
With the move, the trio has directly targeted the trading hotspot of SGX, which has been attracting many global investors due to lower margins and cost of transaction.
“Volumes in derivative trading based on Indian securities including indices have reached large proportions in some foreign jurisdictions, resulting in migration of liquidity from India, which is not in the best interest of Indian markets,” said the statement.
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It is believed that the joint action would also lead to more investor interest in the exchanges set up in Gift City, which is India's first international financial services centre (IFSC). Both, BSE and NSE have their separate bourses at Gift City.
Incidentally, while presenting the Union Budget for 2018-19, Finance Minister Arun Jaitley said that Gift City would soon get a unified regulator while all transactions done on exchanges based in the special zone would be exempted from short term and long term capital gains tax.