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The Singapore and Indian stock exchanges have ended a long battle over derivatives and agreed to launch a trading link between the two markets, marking a substantial improvement in relations between Asian exchanges.
Singapore Exchange said it had agreed with the National Stock Exchange of India to go ahead with a market connection platform and that both parties would withdraw from arbitration proceedings on the trading of Indian stock derivatives in the Southeast Asian city-state. .
SGX had been the leading foreign derivatives provider for Indian stocks before the stock market crash in 2018, when Indian stock exchanges announced that they would stop supplying data to foreign index providers.
At the time, Indian exchanges, including the NSE, said that the popularity of derivatives in Singapore used to hedge exposure to the South Asian country’s equities had resulted in “a migration of liquidity from India, which it does not serve the interests of the Indian markets. “
SGX and NSE said on Wednesday they had received regulatory approvals for a proposed scheme to allow trading of options and futures on the NSE Nifty 50 index of Gift’s SGX, a financial hub in the Indian state of Gujarat. The exchanges did not provide a launch date for the platform.
Loh Boon Chye, CEO of SGX, said the link between the Singapore and Indian markets “would facilitate unrestricted access for global market participants and, in turn, enhance investments and capital market flows between India. and the world”.
The move to strengthen ties with NSE comes as SGX faces pressure to compete with Hong Kong.
Hong Kong Exchanges and Clearing, which operates the city’s stock exchange, snatched SGX’s derivatives license agreements with index provider MSCI in May. The Hong Kong exchange also plans to offer futures trading for Chinese onshore stocks similar to those already offered in Singapore.
Hong Kong will soon host part of the initial public offering of Chinese payment platform Ant Group, which is set to become one of the world’s largest shareholders.
“With this deal resolved it could be a positive point for Singapore and could definitely mitigate our current losses in terms of competitiveness for [Hong Kong]”Said Kelvin Wong, market analyst at CMC.
But Gabriel Sacks, chief investment officer at Singapore-based Aberdeen Standard Investments, said the announcement would not move the SGX needle. “For the most part, it takes an excess of a small percentage of SGX’s revenue.”
The broader impact on SGX’s earnings is unclear. “There are no details of the terms of the deal yet, such as how the revenue will be shared between SGX and NSE,” she said.
The Singapore Stock Exchange is looking to build a more balanced platform after years of delisting and low trading volumes have squeezed its core trading business.
As part of its diversification efforts, SGX has launched a derivatives platform with FTSE International tracking the Taiwanese stock market and plans to expand its presence in the global currency market.
In July, SGX acquired the remaining 80 percent stake in BidFX, a trading venue used by hedge funds and banks, for $ 128 million.
