While NSE and SGX were engaged in arbitration proceedings, they were parallely working on an arrangement at Gift City
which would be acceptable to all stakeholders.
The so-called ‘connect’ model, subject to further approvals from relevant local authorities including India’s Finance Ministry, will enable SGX and NSE IFSC members to access Nifty products at Gift City
while managing their exposures through their respective clearing corporations.
SGX and NSE will continue to work with key stakeholders to make the NSE IFSC-SGX Connect operational before the end of 2020, subject to relevant approvals, NSE said in a press note.
"The aim is to introduce a single pool of liquidity for dollar Nifty Futures contracts in one location," said Vikram Limaye, managing director and chief executive officer, NSE.
Initially, the two exchanges will launch SGX Nifty futures at Gift City, other products may follow later.
Limaye added that NSE is looking to discontinue the ongoing arbitration proceedings against SGX once all the residual approvals are in place and SGX Nifty ceases to trade in Singapore.
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Gift Connect to start functioning from 2020, subject to approvals
The NSE is hoping to transition the liquidity in SGX Nifty futures to GIFT City
in 12 months. Depending on where the trades originate, they will be cleared either by SGX's or NSE's clearing corporations, or, both.
"SGX will set up a subsidiary in Gift City as a special purpose vehicle (SPV), which will be a trading member and clearing member of our GIFT City exchange," said Limaye.
The SPV will be used to route all the trades from Singapore to the common liquidity pool in Gift City.
The current daily volume of SGX Nifty futures on the SGX is about $1.8 billion, while that on IFSC is $150 million.
“India is an important market for international investors and we are committed to collaborating with NSE and other stakeholders to build connectivity and access to one of the fastest growing economies in the world," said Loh Boon Chye, Chief Executive Officer, SGX.
“This is a great opportunity to build vibrant markets
in Gift City. We are working on varied product offerings to make Gift City the hub of activity for all India access products across asset classes for international investors and a gateway for home investors to access international markets," added Limaye.