Mumbai: A 16-year-old relationship between the Singapore Exchange Ltd (SGX) and the National Stock Exchange of India Ltd (NSE) ended up in the Bombay high court, with NSE suing SGX for copyright infringement.

In an interview, Vikram Limaye, managing director and chief executive officer (CEO), said that it is a result of failed discussion with SGX to transition liquidity to NSE and India. Edited excerpts:

NSE has cancelled licensing agreement with SGX. The move was criticized by foreign investors and index provider MSCI. Do you think the criticism is unjust?

 Part of the criticism was a reaction without understanding the context. Our subsequent conversations with foreign players, index providers, data providers indicate that they have understood the logic that fragmenting liquidity is not good for Indian markets in the long term.

These are purely commercial decisions. The reason why this got attention is because we were unwinding an existing position. But we had assured that we will work with everybody to ensure a smooth transition for investors and that they have an option to hedge their risks surrounding India. Even with SGX, we were in discussion for an orderly transition of liquidity from SGX to India. 

NSE’s decision to approach the Bombay high court on SGX’s India-focused products. Will that sour relationships with SGX further and a Gujarat International Finance Tech (GIFT) City connect may not be possible?

Cannot comment on specifics but we were in discussions with SGX for a GIFT connect. An alternative solution that will be acceptable to the market regulator, market participants for transition of liquidity from SGX to GIFT or onshore. But this has unfortunately not worked out. 

 GIFT—India's offering to combat SGX and Dubai—is yet to have any substantial liquidity. What are the hiccups and when will we see liquidity consolidating in GIFT? 

 It is still early days for GIFT as it takes time for exchange ecosystem to establish liquidity. There are discussions going on with regulators on multiple fronts.

Firstly, for foreign investors to set up certain alternative structures outside India if they think it is economically viable to set up shop in GIFT. To help their clients to take India exposure without GIFT presence. Also an ability to trade in other markets while present in GIFT.

Do you think the current ecosystem is healthy enough to tell foreign investors to trade directly in India? 

The registration for foreign portfolio investors (FPIs) has eased considerably in the last couple of years. But there is scope for improvement and the regulators are keen to consider new measures that further eases access for FPIs.

Recognition from US regulator CFTC (Commodity Futures Trading Commission) is an important one as it has taken a number of years to reach here. This also validates not just NSE’s policies but is a broader recognition of Indian environment. This recognition will allow US investors to come directly to India instead of coming through other structures (jurisdictions).

Do you think NSE can now move ahead from the allegations of unfair access on its co-location platform, the so-called legacy issue? Has NSE adequately strengthened its systems?

 The co-location related issues are still ongoing. The technological issue of preferential access was sorted out in 2014 itself. My hope is that the historical or legacy issues are sorted in the coming two-three months and we will move on. 

Will you again apply for consent to settle charges after Sebi finalizes its investigations in terms of ill-gotten gains? 

The reason why our consent application was returned was due to the investigation not being complete. Once Sebi finishes its investigation we will again apply for consent.

Are NSE’s listing plans on track? 

My hope is NSE’s listing should happen this financial year. If the co-location issue is resolved in the next couple of months, we will have enough time to file a fresh DRHP (draft red-herring prospectus). 

A lot has happened in terms of reforms for trading in India markets. For instance, longer trading hours, universal exchanges. How do you look at these changes? 

Extension of trading hours brings us on par with global standards and also allows domestic investors to hedge their position in case of event-specific volatility post market hours.

This creates parity between domestic and international investors. As far as universal exchanges are concerned, from a market participants stand point, there are a lot of synergies involved in trading on one platform.

Having cash on one platform and ability to move it around will immensely aide market participants.

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