Open interest in SGX Nifty front month futures fell by 17%

Investors could be worried by both uncertainty in the SGX’s products and India’s volatility, an analyst said.

After India’s three main stock exchanges decided to pull out their data for offshore derivatives, Jefferies Singapore noticed that there was a decline in the open interest of SGX Nifty front month futures from an average of 380,000 contracts to 314,000 contracts.

Previously, the Singapore Exchange (SGX) said it plans to list new India equity derivative products in June 2018, to provide investors access and tools to hedge exposure in Indian capital markets.

“Whilst it may be attributed to prevailing uncertainty related to the product suite, it may also be due to the outlook of India's equity market, currency, their correlation, risk appetite, etc. We will keep an eye if open interest recovers after the new product launch,” he added.

However, Guha also argued that the new products may mitigate concerns on earnings impact from current product suite. “Currently, SGX has three derivative product suites that offer investors access to Indian markets, namely futures and options linked to SGX Nifty and its various subclasses (Nifty Bank Index, etc.), F&O linked to MSCI India, and futures linked to Indian single stocks. The Nifty suite of products will be impacted by the expiry of the license agreement with NSE. We had estimated earnings to be impacted mid to high single digits in the absence of any complementary products,” he said.

The analyst expects earnings impact to be mitigated to the extent that the new product suite enables investors to seamlessly transition their current India risk management exposures.