910
17 days ago
Nice to ride the winning horse like India: SGX president Syn
Summary
India is home to the world’s biggest derivatives market and the largest population, and is poised to become the third-largest economy by 2030, making it a market global investors cannot ignore, said Michael Syn, president of the Singapore Exchange (SGX Group).
“It is always nice to be riding the winning horse," Syn said in an interview with Mint, referring to India's growth trajectory.
However, the task now is to integrate the deep domestic liquidity in Mumbai with international participation at GIFT IFSC, he added.
“In GIFT City today, participation is currently limited to a handful of players. The real opportunity lies in bringing these two pools of liquidity together. When that happens, India becomes a clear winner,” Syn added.
GIFT IFSC stands for Gujarat International Finance Tec-City—International Financial Services Centre, and is an offshore jurisdiction in the state, allowing trading in dollar-denominated derivative contracts through its exchanges—NSEIX and India INX.
NSEIX is the international exchange of the National Stock Exchange (NSE), while India INX stands for India international exchange, which is the international arm of BSE. Operating out of IFSC at the GIFT City, they facilitate trading in international financial products such as equity and index derivatives.
The most actively traded product is the GIFT Nifty futures contract, which recorded an average daily turnover of $5.01 billion in January, according to its presentation. The GIFT Nifty contract—developed through a partnership between NSE and SGX—was earlier traded on SGX before being brought back to India in 2023.
Volumes on the GIFT Nifty contract remain significantly lower than those of the Nifty 50 futures traded onshore. The number of onshore Nifty 50 futures contracts expiring on 30 March was at 35,238, while the number of offshore GIFT Nifty futures contracts expiring on the same day was at 5,310, as per NSE and NSEIX.
This is largely due to limited participation from capital market intermediaries at GIFT IFSC, as India’s domestic market is far more mature.
As of February, India has 4,843 registered stock brokers, according to the Securities and Exchange Board of India (Sebi), while GIFT IFSC has only 92 broker-dealers.
Even after the migration of Nifty 50 derivatives from SGX to GIFT IFSC in 2023, a majority of trades in the GIFT Nifty contract continues to be routed through SGX rather than NSEIX. This indicates that most global participants still prefer accessing the contract via SGX, with relatively few using the NSEIX route.
“Ideally, the international share should be 1% of the total volume because India’s onshore derivatives volume is 1,000 times more than those in GIFT," Syn said.
“The best of Bombay and best of GIFT can happen when brokers in Mumbai interact seamlessly with the international market and when these two pools come together, India will have firmly established GIFT City as the global trading centre for this part of the world,” Syn said.
He added that growth in participation by brokers and investors at GIFT IFSC would ultimately depend on how the broader market ecosystem evolves, including the extent to which brokers and investors engage with the platform.
When asked whether SGX will work with any other exchange in India apart from the the NSE, Syn said, “We are focused on long-term win-win partnerships, with clearly-defined areas of collaboration.”
“In China, Shanghai and Shenzhen compete yet they understand that some things are done with Shanghai and others with Shenzhen because the government believes it is good for China. We follow the same principle: we do what the government believes is good for India,” Syn said.
China has three key stock exchanges—Shanghai Stock Exchange, Shenzhen Stock Exchange and the Beijing Stock Exchange.
SGX also lists companies from other countries like China, South-East Asia, and Europe, among others. On whether Indian companies can also list on SGX, he said, “That would be our hope and dream—that the connect becomes bilateral over time."
GIFT Connect, a trading link between GIFT IFSC and the SGX, is still at an early stage, but future phases could allow firms to route trades via GIFT to access markets such as China, South Korea and South-East Asia.
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“It is always nice to be riding the winning horse," Syn said in an interview with Mint, referring to India's growth trajectory.
However, the task now is to integrate the deep domestic liquidity in Mumbai with international participation at GIFT IFSC, he added.
“In GIFT City today, participation is currently limited to a handful of players. The real opportunity lies in bringing these two pools of liquidity together. When that happens, India becomes a clear winner,” Syn added.
GIFT IFSC stands for Gujarat International Finance Tec-City—International Financial Services Centre, and is an offshore jurisdiction in the state, allowing trading in dollar-denominated derivative contracts through its exchanges—NSEIX and India INX.
NSEIX is the international exchange of the National Stock Exchange (NSE), while India INX stands for India international exchange, which is the international arm of BSE. Operating out of IFSC at the GIFT City, they facilitate trading in international financial products such as equity and index derivatives.
The most actively traded product is the GIFT Nifty futures contract, which recorded an average daily turnover of $5.01 billion in January, according to its presentation. The GIFT Nifty contract—developed through a partnership between NSE and SGX—was earlier traded on SGX before being brought back to India in 2023.
Volumes on the GIFT Nifty contract remain significantly lower than those of the Nifty 50 futures traded onshore. The number of onshore Nifty 50 futures contracts expiring on 30 March was at 35,238, while the number of offshore GIFT Nifty futures contracts expiring on the same day was at 5,310, as per NSE and NSEIX.
This is largely due to limited participation from capital market intermediaries at GIFT IFSC, as India’s domestic market is far more mature.
As of February, India has 4,843 registered stock brokers, according to the Securities and Exchange Board of India (Sebi), while GIFT IFSC has only 92 broker-dealers.
Even after the migration of Nifty 50 derivatives from SGX to GIFT IFSC in 2023, a majority of trades in the GIFT Nifty contract continues to be routed through SGX rather than NSEIX. This indicates that most global participants still prefer accessing the contract via SGX, with relatively few using the NSEIX route.
“Ideally, the international share should be 1% of the total volume because India’s onshore derivatives volume is 1,000 times more than those in GIFT," Syn said.
“The best of Bombay and best of GIFT can happen when brokers in Mumbai interact seamlessly with the international market and when these two pools come together, India will have firmly established GIFT City as the global trading centre for this part of the world,” Syn said.
He added that growth in participation by brokers and investors at GIFT IFSC would ultimately depend on how the broader market ecosystem evolves, including the extent to which brokers and investors engage with the platform.
When asked whether SGX will work with any other exchange in India apart from the the NSE, Syn said, “We are focused on long-term win-win partnerships, with clearly-defined areas of collaboration.”
“In China, Shanghai and Shenzhen compete yet they understand that some things are done with Shanghai and others with Shenzhen because the government believes it is good for China. We follow the same principle: we do what the government believes is good for India,” Syn said.
China has three key stock exchanges—Shanghai Stock Exchange, Shenzhen Stock Exchange and the Beijing Stock Exchange.
SGX also lists companies from other countries like China, South-East Asia, and Europe, among others. On whether Indian companies can also list on SGX, he said, “That would be our hope and dream—that the connect becomes bilateral over time."
GIFT Connect, a trading link between GIFT IFSC and the SGX, is still at an early stage, but future phases could allow firms to route trades via GIFT to access markets such as China, South Korea and South-East Asia.
Catch all the Business News , Market News , Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
Download the Mint app and read premium stories
AI Description
The article discusses the potential growth of India's derivatives market and the strategic integration of Mumbai's liquidity with GIFT IFSC. It highlights the importance of international participation to establish GIFT City as a global trading hub.