Termination of SGX Nifty Futures on the Cards

Last Friday, Indian bourses NSE, BSE & MSE decided to cancel licensing agreements for providing indices and securities-related data feed services to any foreign exchange or trading platform. It have taken a joint initiative to stop trading of derivative contracts based on Indian indices on overseas exchanges. It is a move to stop migrating liquidity to overseas exchanges.

These steps include barring third-party data vendors such as Bloomberg or Reuters from providing data from Indian exchanges for trading on overseas platforms. “Any usage of data provided by us for trading on international platforms will not be legally permissible,” said VikramLimaye, managing director and chief executive of NSE.

This means the popular SGX Nifty futures contract will cease to exist, after a six-month notice period expires in August. “Our licence agreement with NSE will ensure the continuity of listing and trading our Nifty suite of derivative products till August 2018 at a minimum,” said SGX in the statement.

“NSE’s decision could result in at least a 4% cut to SGX’s total revenue,” said Sharnie Wong, a Bloomberg Intelligence senior industry analyst. SGX’s Nifty-related products accounted for about 10% of its total derivatives revenue in the first half of its fiscal year, based on BI’s estimate.

SGX isn’t the only overseas exchange affected by Friday’s move. NSE will also end its licensing arrangements with CME Group Inc., the Taiwan Futures Exchange and Osaka Securities Exchange, CEO Limaye said.

SGX assured investors on Sunday that regular trades and settlements will continue for Indian equity derivatives on its platform when the exchange opens on Monday. The Nifty suite of products licensed to SGX will continue to be available till August, after which the contract between NSE and SGX will expire. SGX added that trading in Nifty-based single-stock futures will continue.

“SGX will develop and launch new India-access risk management solutions to allow global participants in SGX India equity index family of derivative products, to execute their investment activities with continuity,” the exchange said in the statement.

SGX is also considering NSE’s Gujarat International Financial Tech (GIFT)-based International Financial Services Centre (IFSC) for creating products for global investors.

Current curbs would not be applicable for indices trading in International Financial Services Centre (IFSC) at Gujarat’s Gift City.