Singapore bourse sued by India exchange in futures dispute
SINGAPORE: The National Stock Exchange of India Ltd (NSE) sued Singapore Exchange Ltd (SGX) in a Mumbai court, escalating a dispute that threatens to leave international investors without one of the world’s most widely used offshore futures contracts.
NSE is trying to stop its Singapore counterpart from launching derivatives that could replace the Nifty 50 contracts that have traded in the city-state for 18 years. Global funds use these instruments to hedge their positions in one of Asia’s biggest equity markets. Indian exchanges ended agreements that allowed offshore derivatives in February, leaving SGX and others scrambling.
“This is a big mess,” said David Shin, Asia head of global equity derivative sales at TD Securities in Singapore. “I can’t see how SGX would go through with the launch when this is in the air. There’s a lot of gray here, because if investors do trade the new contract knowing this legal case is out there, is there legal liability that cuts through to the investors of the new contracts?”
SGX, which announced the NSE’s legal action in a statement yesterday, said it has “full confidence” in its legal position and would “vigorously” defend itself.
The Singapore bourse’s stock tumbled on news of the lawsuit, falling the most since April 4. The Mumbai court is expected to hear the case today, according to sources.
Officials at the Registrar General of Bombay High Court were not immediately available for comment when reached on the office line.
“Investors having existing positions in SGX will be affected if the Mumbai court stays the start of the contract,” said Devansh Lakhani, director at Lakhani Financial Services in Mumbai. “Investors with outstanding positions may have to book losses if they aren’t able to rollover to the new contract.”
The exchange’s move is another ratcheting up of tensions between bourses in India and Singapore amid efforts by the former to keep trading onshore.
China and Malaysia are among other emerging economies in the region that have taken steps to keep control of capital flows even as they push to further integrate into global markets. In India’s case, it’s been promoting a tax-free trading zone in Prime Minister Narendra Modi’s home state, known as Gift City, as an alternative to offshore centres.
“The principal objective is to prevent India’s turnover from being affected by overseas venues,” said Gopalan Sridhar, a fund manager at Aquarius Investment Advisors Pte.