Centre backs bourses on foreign products
Mumbai, Feb. 23: India’s government fully endorses a dramatic move by domestic exchanges to cut off data to global bourses, sources familiar with the matter said, seeing it as vital to lure foreign investments into the country from Singapore and other financial centres.
It was only after receiving the endorsement that India’s three private stock exchanges — NSE, BSE and MSEI — proceeded with the joint annou- ncement on February 10 to stop providing data to foreign rivals, said two senior officials at the bourses.
A senior finance ministry official said New ■ Delhi had held “wide consultations” on whether to support the exchanges’ actions, and concluded it was needed to allow a new international finance centre being set up in India “to compete with Singapore and Dubai.”
“We have to balance the needs for domestic interests and our image in the global market,” said the official, declining to be identified as he was not authorised to talk to media. The move by the exchanges, blasted by index provider MSCI Inc as protectionist, reflects long- held wariness by Indian officials about the trading of Indian derivative products overseas, outside the ambit of domestic regulators.
The action is also a tactical move to lure foreign investors to an international financial centre being developed in Gujarat.
Called Gujarat International Finance Tec- City, or GIFT City, the financial centre has failed to gain much traction since INX, a unit of the Bombay Stock Exchange, became the first exchange to set up there last year, despite offering close to zero taxes, dollar contracts, and topnotch infrastructure.
Daily trading volumes at GIFT City are currently only at $ 300-$ 400 million across its equities, currency, debt, and commodity derivatives, a fraction of the tens of billions of dollars at India’s main exchanges. Currently seven domestic banks operate in GIFT City, but no overseas lenders have set up.
The sources said the trading was largely from the banks’ trading desks rather than from foreign investors. Regulatory uncertainty is also a concern. Although India has sought a unified regulator for GIFT City, India has yet to decide on who, while a history of unpredictable regulations worries foreign investors.