Offshore Trading in Indian Indices to End in 6 Months

By the end of this summer, Dalal Street traders will no longer get Nifty rates from Singapore when they sip their morning cup of tea. The Nifty and Sensex, whose derivative contracts are traded in Singapore and Dubai, respectively, will stop the practice in the next six months as Mumbai bourses, the capital markets regulator and New Delhi are all concerned about business moving away from India’s shores.

The National Stock Exchange, the Bombay Stock Exchange and Metropolitan Stock Exchange, in a joint communication, said that they would not provide market data to any foreign exchange.

The exchanges said existing data licensing pacts with overseas bourses would be terminated immediately, subject to notice periods mentioned in the agreements.

“It is observed that for various reasons, the volumes in derivative trading based on Indian securities, including indices, have reached large proportions in some of the foreign jurisdictions, resulting in the migration of liquidity from India, which is not in the best interest of the Indian markets,” the joint statement said.

In the past few years, activity in Nifty futures on Singapore Exchange has exceeded that on the NSE. Foreign investors, who wish to bet on India’s main stock index without registering with the Securities and Exchange Board of India, trade on SGX Nifty futures because of cheaper costs, higher liquidity and better tax rates in the island city. For Indian traders, the SGX Nifty futures that start trading before NSE Nifty every morning act as a directional cue on foreign investor sentiment. The open interest, or outstanding positions, in SGX Nifty is 70-75% more than the total open interest in Nifty futures back home.

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