Despite NSE suit, Singapore exchange to go ahead with Indian listings

The NSE suit against SGX escalates a dispute that threatens to leave international investors without one of the world’s most widely used offshore futures contracts.

However, SGX said in a statement, "We have full confidence in our legal position and will vigorously defend this action. Our clients can continue to trade per normal.”

The NSE is trying to stop its Singapore counterpart from launching derivatives that could replace the Nifty 50 contracts that have traded in Delhi for 18 years. Global funds use these instruments to hedge their positions in one of Asia’s biggest equity markets.

Indian exchanges in February ended agreements that allowed offshore derivatives, leaving SGX and others scrambling.

The Singapore-based exchange said that it has communicated to NSE that India needs to maintain liquidity in its offshore equity derivatives market.

"We have, from the onset, expressed to NSE that there is a need to maintain liquidity in the international India equity derivatives market, in order to connect international participants to GIFT IFSC," Michael Syn, head of derivatives, SGX said in a statement.

“This is a big mess,” David Shin, Asia head of global equity derivative sales at TD Securities in Singapore, told Bloomberg Quint. “I can’t see how SGX would go through with the launch when this is in the air. There’s a lot of gray here, because if investors do trade the new contract knowing this legal case is out there, is there legal liability that cuts through to the investors of the new contracts?”

The Singapore bourse’s stock tumbled on news of the lawsuit, falling the most since 4 April. The Mumbai court was expected to hear the case today, according to an unconfirmed report.

NSE spokesman Debojyoti Chatterjee declined to comment.

China and Malaysia are among other emerging economies in the region that have taken steps to keep control of capital flows even as they push to further integrate into global markets. In India’s case, it’s been promoting a tax-free trading zone in Gujarat known as GIFT City, as an alternative to offshore centres.

Only last month, SGX had said it is evaluating a joint trading and clearing model with NSE in Gujarat International Finance Tec-City. Earlier, there were reports of it considering buying a stake in NSE's exchange in GIFT.

In February, three Indian stock exchanges — NSE, BSE, and Metropolitan Stock Exchange of India — had cancelled licensing agreements with overseas exchanges for sharing their data feed services and indices.

The current licensing agreements between foreign exchanges and domestic ones are scheduled to expire in August.