SGX delays launch of new India products as NSE gets injunction order

Singapore Exchange
The Singapore Exchange (SGX) has put on hold the launch of its new India derivatives products following the injunction order obtained by the National Stock Exchange (NSE) from the Bombay High Court.

The Singapore bourse was to migrate all existing client contracts on the SGX Nifty Futures to the new SGX India Futures from June. However, SGX now plans to continue offering NSE-licensed Nifty contracts until August 2018, when the agreement between the two bourses is to end.

Through a circular dated April 11, SGX had announced the launch of three new India products—SGX India Futures, SGX India Bank Futures and SGX Options on India Futures. As the new products were strikingly similar to licensed Nifty products, NSE’s index providing arm India Index Services and Products (IISL) moved Bombay HC on May 21. On May 29, the court granted an interim injunction against the launch of SGX’s new India derivatives products.

“In view of the uncertainty caused by IISL’s action, and after consultation with key stakeholders, we have decided to continue listing SGX Nifty contracts until August 2018, as contractually provided for under our licence agreement with IISL. This will enable our clients to manage their portfolio risks without interruption. We will reschedule the launch of our new India derivatives products, pending the outcome of the arbitration,” said SGX in a statement on Tuesday.

“SGX will contest the interim injunction and reserves all rights in respect of damages caused by IISL’s action,” it further said.

In February, domestic exchanges announced the termination of data feed and licensing agreements with their global counterparts in order to put an end to offshore trading in Indian products. The move put NSE and SGX at loggerheads, as India products accounted for a sizeable volume on the overseas bourse. The Nifty index contributes nearly 10 per cent to SGX’s equity derivatives revenue.  

SGX has maintained that investors largely trade on Nifty products on its platform for hedging their underlying India exposure.  The new India products were to allow international portfolio investors maintain their exposure, SGX had said while announcing the new products.

“IISL’s action has adversely affected international investors who rely on SGX’s platform to manage the risks of their exposures to the Indian market, and significantly diminishes access to, and interest in the capital markets in India. SGX remains open to a collaborative long-term solution that will benefit Indian markets,” the Singapore bourse said.

Trading volumes of Indian derivatives contracts on SGX have dropped 25 per cent between February and April.

  • February 9: Indian exchanges end data sharing tie-ups with their foreign counterparts; Agreements to end in August
  • February 12: Shares of SGX tumble as analysts see pressure on earnings
  • April 11: SGX announces new India products; Says will migrate client positions to new products in June
  • May 21: NSE moves Bombay HC to stop SGX from launching new India products
  • May 22: Court grants interim injunction against the launch of new India products
  • May 29: SGX says continue listing SGX Nifty contracts until August 2018 

Monetary Authority of Singapore (MAS) raised concerns over the dispute between the NSE and SGX, terming it disruptive to investors. “The commercial dispute… is disruptive for international institutional investors in Indian equities.  The range of available financial instruments for investors to hedge exposures and manage risks in Indian equities will be reduced.  A prolonged dispute will impact the accessibility of the Indian equities market to international investors,” said an MAS spokesperson. The central bank urged all parties to find an amicable solution. “A speedy resolution to the dispute will be in the best interest of all parties concerned,” it said. 

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