Sunday, 13 October, 2019

India's bourses to stop licensing index, stock prices

India's stock exchanges to stop licensing index stock prices to foreign exchanges India`s stock exchanges said they would stop licensing their indexes and securities or providing data to foreign exchanges. Image source IANS
Russell Knight | 12 February, 2018, 06:48

The coordinated move from the bourses assumes significance at a time when Singapore Stock Exchange (SGX) has launched trading in single-stock futures in 50 of India's top companies that are part of the Nifty index - a development that has triggered concerns about liquidity moving out of the country.

India's three main stock exchanges - National Stock Exchange of India (NSE), Bombay Stock Exchange (BSE), and the Metropolitan Stock Exchange of India (MSEI) - announced that they will stop the licencing of data for offshore derivatives linked to their domestic indices.

Foreign bourses now offer dollar-based derivative contracts based on Indian indices, shares and other securities under licensing agreements with domestic exchanges, allowing overseas investors to gain exposure to Asia's third-largest economy without having to trade onshore.

SGX's Nifty 50 Index Futures, which lets investors bet on movement in Indian stock prices, accounts for 12% of its derivatives volumes.

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The SGX responded in a statement that it will "take all measures to maintain orderly trading and clearing of SGX India equity derivatives for our global clients". Under the contract NSE needs to provide a notice period of six months to SGX to terminate the agreement.

Such indices are licensed by the index providers to prospective licensees, including foreign stock and derivatives exchanges and other foreign trading platforms for enabling them to provide products for trading and settlement on such foreign exchanges.

"We want to encourage flows into India, but we want to also make sure that liquidity doesn't get fragmented from Indian markets into multiple jurisdictions", he said.

The NIFTY 50 covers major sectors of the Indian economy and offers investment managers exposure to the Indian market in one efficient portfolio.

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