Home >Markets >Stock Markets >NSE and SGX ink agreement to set up ‘GIFT Connect’
NSE had an agreement with SGX that authorized the latter to allow trading in derivatives such as index options and index futures benchmarked to Nifty 50, (Photo: Mint)
NSE had an agreement with SGX that authorized the latter to allow trading in derivatives such as index options and index futures benchmarked to Nifty 50, (Photo: Mint)

NSE and SGX ink agreement to set up ‘GIFT Connect’

  • The move comes almost a year after SGX and NSE had reached a truce over trading of Nifty derivatives in Singapore, with the two agreeing to create a new platform for trading these derivatives out of GIFT

MUMBAI: The National Stock Exchange of India (NSE) and the Singapore Exchange (SGX) on Tuesday announced the signing of an agreement to cement key terms for operationalising the NSE IFSC-SGX Connect.

This will bring together international and GIFT participants to create a bigger liquidity pool for Nifty products at the Gujarat International Finance Tec-City (GIFT) in Gandhinagar.

The move comes almost a year after SGX and NSE had reached a truce over trading of Nifty derivatives in Singapore, with the two agreeing to create a new platform for trading these derivatives out of GIFT.

"...Both NSE and SGX will also withdraw the arbitration proceedings," the two exchanges said in a joint press statement.

The exchanges said they have recently received regulatory clarifications from relevant authorities on the implementation of the so-called Connect. The exchanges did not elaborate on the clarifications sought by Securities and Exchange Board of India (Sebi) and Monetary Authority of Singapore (MAS).

Major details of the Connect are yet to be announced by the exchanges. But those known include revenue sharing model, anti-money laundering norms, client on-boarding, whether some of SGX's clients would set up shop at GIFT.

“Building connectivity across international platforms in Singapore and India will facilitate unfettered access for global market participants, and in turn enhance investments and capital market flows between India and the world," said Loh Boon Chye, chief executive officer of SGX.

According to people aware of the matter, SGX would set up a company at GIFT which will act as a special purpose vehicle (SPV) to facilitate trading of its clients at NSE-IFSC. SGX will act as the clearing member so the bulk of revenues from trades at NSE-IFSC would go to SGX. Trade-off for NSE-IFSC is building liquidity at GIFT in a smaller time-frame.

"The connect creates a win-win situation for both sides, which makes it possible to have a sustainable and growing partnership between NSE IFSC and SGX," said Injeti Srinivas, chairman, IFSC Authority.

"The exchanges also need to find a solution to India's rules to prevent money-laundering. Indian exchanges follow a ‘segregated nominee account structure’ for client accounts, which helps depositories and exchanges identify the ultimate beneficiary of these accounts, SGX allows an ‘omnibus account structure’, where regulators get no such information," said the person quoted above.

Vikram Limaye, CEO, NSE said "the connect will broaden the international and domestic participant base and further strengthen the capital market ecosystem in GIFT city resulting in more broad-based development across asset classes and capital raising activity".

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