India's National Stock Exchange (NSE) aims to have at least 100 members trading on the GIFT Nifty (formerly known as Singapore Stock Exchange Nifty or SGX Nifty) by the end of the year, says Ashishkumar Chauhan, NSE's Managing Director and CEO.
The SGX Nifty, which has undergone a transformation and is now known as the GIFT Nifty. All futures trading that previously took place on the SGX Nifty will now be conducted through the GIFT Nifty. CNBC-TV18 spoke to Ashishkumar Chauhan and V Balasubramaniam, MD & CEO of NSE INX, and according to Chauhan, the SGX Nifty attracted numerous local brokers and facilitated direct market access. Currently, the NSE has 60 members who are authorised to trade on the GIFT Nifty, with an additional 40 members in the process of joining, he said.
Below are the excerpts of the conversation.
Q: The SGX Nifty has undergone a transformation, and is now known as the GIFT Nifty, what do you think will be the impact of this major development for the Indian market?
Chauhan: In a way SGX has local brokers, they have clearing members, but they also allow direct market access to people across the world. So they have literally millions of customers who are investing into products in which SGX trades. And so all of them now are eligible to trade on this product. And of course, the NSE IEX has its own 60 members and their customers, we already have 40 more members in pipeline. So by this yearend we should have around 100 local members at the NSE IEX.
Q: Would retail investors, Indian retail investors be allowed to trade or not? What is going to be the mechanism around that, and who otherwise would be the eligible participants who would be allowed to trade as far as GIFT Nifty itself is concerned?
Chauhan: This is dollar market, and in some ways, it is home away from home. Because we have capital account convertibility Indians can take out money for investments only through liberalised remittance scheme and that is where basically there are restrictions of investing or trading in speculative product like derivatives. This being a derivative product, especially for the Nifty, GIFT Nifty, it's pure derivative products, and that's where the retail investors may not be able to trade. But the depository products that is the depository receipts of Microsoft, and many other US companies, the investors would be able to directly invest, of course, they will have to tie-up with the brokers who have a setup up in GIFT city at members of NSE IEX and that is where Indians would be able to actually directly own a depository receipt of a company like Google, or Microsoft, or Amazon, which they have always wanted to do through the GIFT City.
Q: As of now, today, we see four products being introduced under the GIFT Nifty series. What's the plan going forward? What new products are you brainstorming right now? Would we see other such parallel products also coming up and importantly, do we see individual stock futures also trading as far as this particular platform is concerned?
Balasubramaniam: In terms of the product offerings, I think apart from the current arrangement, we are looking at a lot more offerings, which will directly give to our members. So single stock futures, which are traded in India, single stock, futures and options all of them are available at our exchange. And I think this year in the Budget, there has been announcement about allowing offshore derivative instruments in the GIFT City zone. So I am sure a lot of international brokers will be excited with that, as soon as that gets operational regime so I think lot more liquidity is expected even on the single stock futures side.
In terms of other product offerings, in terms of what are the products in the pipeline, I think we are clearly looking at some depositary receipts on Indian stocks. Also apart from the depositary receipts which are there on the global stocks, which Ashishkumar just talked about and that is something which is the Indian stock derivative is actually targeted at international participants, not the other way around, while the foreign stocks is targeted at the local retail participants from India. We are also looking at listings of REITs, InvITs. In fact, we already have a very vibrant debt listing market, out of the external commercial borrowing which Indian corporates have done, close to 130-132 billion, almost 70 billion is now happening through the GIFT IFSC jurisdiction.
Also Read | India's largest cement producer is at a 52-week high courtesy of a 20% jump in June quarter sales volume
Q: Today, of course, we made the transition to GIFT Nifty, now before this, what is the kind of open interest which sort of migrated from the closing to today? And what is your internal expectations in terms of average daily volume that you expect on GIFT Nifty itself?
Balasubramaniam: So just to give you a sense, today on the Indian market, the open interest is around $2 to 2.5 billion in terms of open interest value. So, yesterday with the switch happening a bit in the futures and options, we have got close to about $9.3 billion of open interest, out of which $8.1 billion is the futures and almost $1.1 billion is the options. So that is basically the size which we already got.
In terms of the volumes, I think on an everyday basis close to about $1.5 to 2 billion transacts on the SGX, so we think that will definitely happen but that is already the existing liquidity which I think will get captured here. Additionally since we are bringing a new set of players from the Indian zone who are in the IFSC so I think the liquidity will start growing.
(Edited by : C H Unnikrishnan)
Check out our in-depth Market Coverage, Business News & get real-time Stock Market Updates on CNBC-TV18. Also, Watch our channels CNBC-TV18, CNBC Awaaz and CNBC Bajar Live on-the-go!
