NSE to have SGX’s Nifty trade routed via Gift City soon

Mumbai: The National Stock Exchange (NSE) and the Singapore Exchange (SGX) have finalised an agreement that will result in trades done in Nifty and Bank Nifty futures contracts in the island nation being executed in International Financial Services Centre (IFSC), Gift City, Gujarat. Both the exchanges have submitted their plans to the capital market regulators of India and Singapore and are expecting their proposals to be cleared in the next one month, said two people privy to the development.

As per the arrangement, SGX will enrol as a client of NSE in Gift City. SGX will start a special purpose vehicle (SPV) that will register as a broker with NSE’s subsidiary at Gift City and all the Nifty trade orders being placed from SGX will be routed to Gift for execution. The arrangement is first of its kind and hence needs several regulatory exemptions. For instance, a broker acts as an interface between the client and the exchange in normal cases. However, in the proposed arrangement there would be additional interface since the exchange SGX will act as a broker while NSE IFSC will act as the exchange.

The agreement puts to rest the two-year tussle between NSE and SGX over trading of Indian derivative products on the Singapore platform.

One of the sources cited above said the exchanges have sought several regulatory exemptions from Sebi including relaxation in Know Your Customer (KYC) norms and grandfathering of investments made before the arrangement came into effect.

Initially, both the exchanges had proposed to establish an inter-exchange connectivity in-line with Shanghai-Hong Kong stock connects. However, both the market regulators, the Securities and Exchange Board of India (Sebi) and Monetary Authority of Singapore (MAS) have expressed reservations about the proposal prompting the exchanges to restructure the arrangement.

“Both the regulators are comfortable with the proposal in the current form and we are in the final stages of approval,” said a source cited above. “However, since the arrangement would need tweaks to existing laws, the final approval could take another month or so.”