SGX looks to avoid India's Nifty licence limits

It plans to launch India-access risk management products for derivatives.

The Singapore Exchange (SGX) will develop and launch new India-access risk management products for participants in the SGX India equity index family of derivative products to continue their investment activities.

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.

According to a statement, the three exchanges said, “for various reasons, the volumes in derivative trading based on Indian securities, including indices, have reached large proportions in some of the foreign jurisdictions, resulting in migration of liquidity from India, which is not in the best interest of Indian markets.”

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."

The market for the India suite of products including Nifty will open and operate per normal on Monday, 12 February 2018.

The exchange added that its licence agreement with NSE will ensure the continuity of listing and trading the Nifty suite of derivative products until August 2018 at a minimum.

According to OCBC Investment Research, the SGX Nifty 50 Index Futures accounted for about 11.5% of SGX’s derivatives volume in 2Q2018 and is the third largest in terms of volume, after the SGX FTSE China A50 Index Futures and the Japan Nikkei 225 Index Futures.

DBS Equity Research added that the products also comprised 9% of SGX's derivatives revenues and about 4% of total company revenue in the first half of 2018.

OCBC analyst Carmen Lee said, "We expect some downgrades ahead following this news which will dampen the share price for the near term."