SGX to launch Indian derivatives before NSE deal ends

The Singapore Exchange (SGX) said on Monday it would launch successor products to its flagship Indian equity index derivatives before the bourse’s licence agreement with the National Stock Exchange (NSE) expires in August 2018.

The move comes days after India’s three main bourses unexpectedly announced they would stop licensing their indexes to overseas exchanges, news which hit SGX’s shares as brokers cut the bourse's earnings estimates.

“Our successor products will provide certainty and continuity for our clients. At the same time, we continue to work with the NSE to create a larger pool of liquidity comprising international and home market participants,” Michael Syn, head of derivatives at SGX, said in a statement.

Over the past two decades, the SGX has become the most popular way for foreign investors to bet on Indian equity indexes with the Nifty50 futures tracking the NSE’s main index.

“We view the announcement of the successor products to the SGX Nifty family of products as a positive development to the chain of events which unfolded last week,” analysts at DBS Group Research said in a report on Monday.

“The successor products, though not as well-established as the SGX Nifty family of products, will continue to allow access into Indian markets and feed demand for Indian offshore products,” DBS Group Research said.

The SGX’s Indian equity derivatives products account for about 12 per cent of its total derivatives trading volume. Over the last few years, the exchange has rapidly expanded its suite of derivatives that have helped to power growth in earnings while its cash equities business weakened.

The SGX said along with the NSE, it would also develop a link that will allow global market participants to trade on the NSE’s international exchange in the western Gujarat state, where India is developing a new financial centre and offering dollar-based derivative contracts and lower taxes.