INTRODUCTION OF GIFT NIFTY
In a historic development within India’s global trading landscape, the renowned SGX Nifty is slated to undergo a transformative rebranding, emerging as GIFT NIFTY effective from July 3, 2021. This monumental shift will witness derivative contracts valued at $7.5 billion, previously traded on the Singapore Exchange, relocating to India.
The commencement of operations for GIFT NIFTY marks a pivotal moment in the relocation of the Singapore Exchange’s base to the NSE International Exchange (NSE IX) situated in Gandhinagar, Gujarat.
GIFT City, nestled in Gujarat, emerges as a burgeoning financial hub, strategically positioned by the government to rival other prominent global financial centers such as Dubai, Mauritius, and Singapore.
This recent initiative comes on the heels of a resolution of a protracted five-year dispute involving the National Stock Exchange of India Ltd., lending it profound significance within India’s trading ecosystem and the burgeoning landscape of Gujarat’s GIFT City.
Significance of SGX Nifty’s Transformation into GIFT Nifty for India’s Financial Landscape
The metamorphosis of SGX Nifty into GIFT Nifty heralds a new era in India’s financial domain, carrying profound implications and benefits for the nation:
1. Introduction of Four Distinct Products: Under the umbrella of GIFT Nifty, four distinct products will be introduced: GIFT Nifty 50, GIFT Nifty Bank, GIFT Nifty Financial Services, and GIFT Nifty IT derivative contracts, fostering diversified investment avenues.
2. Watershed Moment for India: Termed as a “watershed moment in the history of India” by V Balasubramaniam, MD, and CEO of NSE International Exchange, the transition signifies India’s attainment of its first international contract previously executed outside its borders.
3. Catalyzing Growth in GIFT City: GIFT City, India’s premier international financial center, stands to witness exponential growth. The removal of FEMA restrictions by RBI in 2015 paved the way for its ascension. The relocation of derivative contracts from SGX-Nifty is poised to amplify Indian bourses’ revenue, augmenting the financial vitality of GIFT City.
4. SGX-NIFTY’s 50-50 Partnership: With a “roughly 50-50” cost and revenue sharing agreement between SGX and Nifty, the transition ensures equitable collaboration. Trading of futures and options will be conducted in GIFT City, with SGX overseeing clearing operations.
5. Extended Trading Hours: GIFT Nifty’s operational window expands significantly, operating from 4 am IST to 2 am IST the following day, enhancing accessibility and facilitating global participation. All US dollar-denominated Nifty derivatives contracts will exclusively trade on NSE IFSC post-transition.
6. Shift in Market Dynamics: The transition marks a shift in market dynamics, as GIFT Nifty supersedes SGX Nifty as the primary market indicator. Previously, SGX Nifty dictated Indian market trends; however, GIFT Nifty will now assume this role.
7. Expansion of Global Investor Reach: The NSE-SGX connect serves as a conduit for expanding Indian market reach among global investors. Initiatives such as sponsored and unsponsored depository receipts of Indian stock, facilitated by GIFT IFSC, promise to enhance international investor engagement.
The transformation of SGX Nifty into GIFT Nifty not only signifies a pivotal moment in India’s financial evolution but also underscores its burgeoning prominence on the global stage, fostering inclusivity, innovation, and growth within its financial ecosystem.
Let’s take a look at the historical progress of GIFT Nifty
On August 6, 2019, the National Stock Exchange (NSE) of India and the Singapore Exchange (SGX) successfully obtained regulatory approval for their collaborative derivatives project.
On August 6, 2019, the National Stock Exchange (NSE) of India and the Singapore Exchange (SGX) secured regulatory approval for their joint derivatives project, marking a significant milestone in their collaboration. This initiative aimed to facilitate trading stock index-based products from an international financial center situated in western India.
The planned collaboration centered around bringing trading of SGX’s Nifty futures contract, based on NSE’s Nifty 50 index, to the Gujarat International Finance Tec-City (GIFT), an ambitious initiative spearheaded by Indian Prime Minister Narendra Modi in his home state. The partners anticipated that this move would not only enhance liquidity for the product but also stimulate activity at GIFT City.
Despite facing hurdles and regulatory procedures, including ongoing arbitration proceedings, both exchanges expressed determination to push forward with their proposed NSE International Financial Service Centre (IFSC)-SGX Connect project at GIFT. They aimed to operationalize this venture by the end of 2020, contingent upon member readiness and obtaining requisite approvals.
Vikram Limaye, Managing Director and Chief Executive of NSE, articulated his vision for GIFT City to become the focal point for all India access products, expressing optimism that transitioning SGX Nifty futures volumes to GIFT IFSC would pave the way for broader migration of such products.
GIFT City, offering advantageous tax incentives, dollar contracts, and superior infrastructure, had long been positioned as an attractive destination for foreign investors. However, despite these advantages, daily trading volumes at GIFT City remained modest compared to the country’s primary stock exchanges.
SGX Nifty futures, trading in Singapore, boasted daily average volumes of $1.8 billion, significantly overshadowing trading volumes on NSE’s international exchange at GIFT. Over the preceding two decades, SGX had emerged as the preferred market for foreign investors to speculate on Indian equity indexes, particularly through Nifty 50 futures tracking NSE’s flagship index.
The collaborative efforts between NSE and SGX not only aimed at enhancing trading opportunities but also at positioning GIFT City as a prominent global financial center, aligned with India’s broader aspirations for economic growth and investor engagement.
NSE IFSC heralds a new era with the announcement of the launch of an international sustainability platform at GIFT City.
NSE IFSC Ltd, a subsidiary of the National Stock Exchange (NSE), has unveiled plans for the launch of an international sustainability platform at Gujarat’s GIFT City, anticipated to commence operations in the latter half of the year. This pioneering initiative marks the debut of an ESG (environmental, social, and governance) platform in India, aiming to catalyze the listing and trading of diverse sustainability products such as green bonds, voluntary carbon, sustainable bonds, green real estate investment trusts (REITs), and green equity, among others. Situating this platform in GIFT City is poised to enable international investors to actively engage in ESG transitions not only in India but also in other markets.
“With an anticipated operational launch in the second half of 2022, subject to regulatory approvals, issuers aspiring to list on the platform will need to adhere to a minimum set of ESG standards, in addition to meeting specific criteria outlined by NSE IFSC for their respective sustainability products,” stated NSE IFSC.
The platform envisages the participation of a broad spectrum of entities, including large corporations, small and medium enterprises, startups, non-profits, social impact organizations, as well as governmental and quasi-governmental bodies, leveraging its capabilities to attract capital and realize their climate and ESG objectives.
Leveraging Distributed Ledger Technology (DLT) or Blockchain, the sustainability platform aims to ensure integrity, speed, tracking, and traceability of transactions.
“We are steadfast in our commitment to establish the international sustainability platform at GIFT City. Such a trading platform holds immense potential in mobilizing capital necessary for ESG and sustainability transitions worldwide,” affirmed Vikram Limaye, Managing Director and CEO at NSE.
Echoing this sentiment, Injeti Srinivas, Chairman of IFSCA, highlighted the platform’s role in promoting responsible business practices and enabling entities to secure sustainable finance.
Collaborating closely with NSE IFSC in this endeavor are ECube Investment Advisors, an ESG-focused platform, and Chainflux, a Blockchain products firm.
NSE IFSC, situated within Gujarat’s GIFT City, stands as India’s premier International Financial Services Centre (IFSC), offering a conducive environment for financial innovation and growth.
NSE Signs Pact to Set Up International Bullion Exchange at GIFT City on 01-Mar-2021
The National Stock Exchange (NSE) announced on Monday its collaboration with other entities to establish an international bullion exchange, clearing corporation, and depository at Gujarat International Finance Tec-City (GIFT City).
Joining NSE in this endeavor are the Multi Commodity Exchange of India Ltd, India INX International Exchange Ltd, National Securities Depository Ltd, and Central Depository Services (India) Ltd, as outlined in a press release.
The Memorandum of Understanding reflects the government’s strategic objective to position India as a significant determinant of bullion prices, leveraging the GIFT International Finance Service Centre (IFSC) framework. This initiative is in accordance with the International Financial Services Centres Authority (Bullion Exchange) Regulations, 2020, and other relevant laws.
NSE International Exchange Unveils a New Identity for Gift Nifty from 03-July-2021
Gift Nifty derivative contracts, set to commence trading on the NSE International Exchange (NSE IX) from July 3, will offer extended accessibility spanning nearly 21 hours, surpassing the trading window of SGX Nifty contracts on the Singapore Exchange. The transition of Nifty derivative contracts from the Singapore Exchange to NSE IX marks the inception of Gift Nifty.
Operating for nearly 21 hours, Gift Nifty provides a unified liquidity pool and a platform to access dollar-denominated Nifty derivatives at NSE IX under the regulatory framework of the International Financial Services Center Authority (IFSCA), facilitating seamless trading across Asia, Europe, and US trading hours.
Through a strategic collaboration between NSE IX and SGX, Gift Nifty orders from SGX members will be directed to NSE IFSC for trading and execution, with clearing and settlement managed through SGX Derivatives Clearing.
Initially, market participants can engage in trading Gift Nifty 50, Gift Nifty Bank, Gift Nifty Financial Services, and Gift Nifty IT derivative contracts on NSE IX, with plans to introduce additional indices gradually under the Gift Nifty suite.
Injeti Srinivas, Chairperson of IFSCA, emphasized IFSCA’s objective to position IFSC as a global hub for international financial services, underscoring the significance of Gift Nifty in this pursuit.
Ashishkumar Chauhan, MD, and CEO of NSE, highlighted the transformative role of Gift Nifty in advancing GIFT City’s vision to become a prominent price setter for the world’s most traded instruments.
As part of efforts to enhance the ease of doing business for foreign entities, IFSCA plans to introduce a single-window clearance system. This system will streamline the clearance process, encompassing no-objection certificates from both IFSCA and other domestic regulators, as noted by Srinivas.
Inauguration of SGX’s GIFT City Office and the Launch of GIFT Data Connect on 23-Oct-2021
Over three years after a rift between leading Indian bourses and the Singapore Stock Exchange (SGX), the National Stock Exchange (NSE) marked a significant milestone on Friday by signing a deal with SGX. This agreement paves the way for global investors to trade all derivative contracts based on NSE’s products at Gujarat’s GIFT City. The joint venture company, SGX India Connect IFSC, will operate the new trading platform, potentially featuring popular derivative contracts like SGX Nifty and products tied to NSE’s other indices. This platform will offer extended trading hours, catering to investors from Japan to the United States.
The collaboration between NSE and SGX signifies a shift from earlier concerns raised by the markets regulator, Sebi, in 2018, regarding the potential diversion of global investors from Indian bourses to foreign ones. However, the new arrangement ensures that derivative products based on Indian stocks and indices will be traded on a platform under India’s jurisdiction.
During the inauguration, SGX India Connect IFSC inaugurated its office in GIFT City and unveiled GIFT Data Connect. This connectivity will grant global investors real-time access to Nifty’s trading data, empowering them to refine their trading strategies using live NSE data ahead of the formal launch in the coming months.
Membership Process
- Incorporate a company in GIFT SEZ.
- Submit an application to GIFT SEZ-IFSC and obtain approval from the Development Commissioner.
- Submit the application to NSE IFSC/NSE IFSC CC.
- Receive the NSE IFSC Exchange/CC offer letter, subject to SEBI approval.
- NSE IFSC forwards the application to SEBI for registration.
- Obtain SEBI approval.
- Forward the SEBI certificate to the member.
- Submit enablement documents.
- Member is enabled on the Trading system.
Note: For existing SEBI registered IFSC members, Membership will be granted by NSE IFSC Exchange/NSE IFSC CC.
REC Limited achieved a significant milestone with the exclusive primary listing of its USD 750 million Green Bonds at GIFT IFSC Stock Exchanges.
REC Limited, the state-run power sector financier, made history with the exclusive primary listing ceremony for its USD 750 million green bonds at GIFT IFSC Stock Exchanges. This significant event underscores REC’s position as a key player in the international capital markets, with its Green Bonds oversubscribed approximately 3.5 times by 161 investors globally.
The issuance of Green Bonds by REC marks a milestone, representing the largest senior USD tranche by an Indian NBFC and the first Green Bond offering by an Indian company following India’s G20 Presidency. The exclusive listing of REC’s Green Bonds on IFSC Stock Exchanges highlights their resonance with global investors, as noted by Mr. Injeti Srinivas, Chairperson of IFSCA.
Mr. Srinivas expressed his delight at REC Limited’s decision to list their USD 750 million Green Bonds exclusively on IFSC Exchanges, emphasizing that this listing pushes the cumulative ESG labeled bonds on IFSC Exchanges beyond USD 10 billion. He further emphasized the pivotal role of GIFT IFSC as a conduit for attracting foreign capital into sustainable projects in India, aligning with the nation’s climate change commitments and SDG goals.
REC’s Green Bond issuance not only signifies progress towards India’s climate action plan and energy transition but also elevates the total bond issuance on IFSC exchanges to over USD 51.7 billion, with medium-term notes exceeding USD 73 billion. This solidifies GIFT IFSC’s position as a global hub for sustainable finance, catalyzing positive change and fostering economic growth in India.
NSE IFSC is set to kick off trading for Amazon, Tesla, and 6 other US stocks: Here’s all you need to know.
Beginning Thursday (March 3), a subsidiary exchange of the National Stock Exchange operating within Gujarat International Finance Tech City (GIFT) will streamline the process for investors to engage in buying and selling US shares. Initially, investors will gain access to trading eight prominent US stocks, with plans for a phased introduction of 50 stocks, mirroring the practices observed in US markets. While this development might suggest that US stocks are being listed in India, it’s essential to clarify that this isn’t the case. Instead, the initiative introduces a derivative product known as NSEIFSC Receipts, offered by the NSE IFSC exchange. These receipts enable Indian investors to access US shares at a reduced cost without the need for a US-based broker, eliminating the necessity to route investments through foreign intermediaries to purchase shares of companies like Tesla or Netflix.
Let’s simplify the jargon. Firstly, what exactly is the NSE IFSC exchange? It’s a wholly-owned subsidiary of the National Stock Exchange of India (NSE) with approval from the market regulator to operate an international exchange within the GIFT – International Financial Service Centre (IFSC) in Gandhinagar. This exchange allows trading in various financial instruments such as equity shares of foreign companies, depository receipts, debt securities, currencies, indices, interest rates, and non-agricultural commodity derivatives. Essentially, it’s the platform where trading of derivatives will take place.
Now, what are NSEIFSC Receipts? These are essentially a way to make US stocks accessible to Indian investors. Market makers will purchase shares in the US and issue receipts against them, known as NSEIFSC Receipts. These receipts represent ownership stakes in the respective companies, allowing investors to buy or sell them just like regular shares.
Which stocks will be available via these receipts starting March 3? Initially, investors will have access to eight stocks through these receipts: Amazon, Tesla, Alphabet, Meta Platforms, Microsoft, Netflix, Apple, and Walmart.
The plan is to expand this list to include 50 US stocks, with additions such as Adobe, Berkshire Hathaway, Mastercard, Visa, Chevron, Morgan Stanley, Paypal, and JP Morgan. However, the trading commencement dates for these and other remaining stocks will be determined later. Now, a crucial question arises: if an investor purchases one receipt of a stock, do they own a share in that company? The answer is no. NSE IFSC will issue the receipts in specific ratios. For instance, one share of Tesla will correspond to 100 NSE IFSC receipts, while one share of Amazon will equate to 200 IFSC receipts. This implies that the value of Tesla’s receipt will be approximately one-hundredth of Tesla’s share value. Similarly, for the other six stocks available for trading from Thursday, the ratios are as follows: Alphabet (200), Meta Platforms (50), Microsoft (50), Netflix (50), Apple (25), and Walmart (25).
Moving on, what currency will be used for trading US stock receipts? NSEIFSC Receipts on US Stocks will be traded in US dollars, with a tick size of one cent ($0.01). This means investors can bid for the receipts in increments of $0.01, such as $6.62, $6.63, $6.64, and so forth, but not $6.632.
Now, regarding investment limits, Indian retail investors can transact on the NSE IFSC platform within the Liberalized Remittance Scheme (LRS) limits prescribed by the Reserve Bank of India (RBI). Under the LRS framework, resident individuals are permitted to remit up to $250,000 per financial year, equivalent to approximately Rs 1.9 crore based on the current conversion rate.
Finally, how does one trade in these receipts? Investors can participate by opening trading and demat accounts with NSE IFSC registered brokers. Presently, 36 brokers are registered with the exchange. Once funds are transferred from the investor’s local bank account to the broker’s account and reflected, they can begin trading in NSE IFSC US stocks.
To start trading via the IFSC route, you’ll first need to open trading and demat accounts with NSE IFSC registered brokers. Currently, there are 36 brokers registered with the exchange. Once your accounts are set up, you’ll need to transfer funds from your local bank account to your NSE IFSC registered broker’s bank account. Once the funds reflect in your broker’s account, you’re all set to trade in NSE IFSC US stocks.
Now, let’s talk about trade timing. Trading in these receipts will follow US trade timings, starting at 8 pm in the evening and continuing until 2:30 am the next day. This trading cycle spans two calendar days but is considered as one single business day. Time adjustments will be made based on Daylight Saving changes, as applicable.
What benefits do retail investors gain from trading via the IFSC route compared to traditional methods? Accessibility is key. Currently, investing in US stocks is cumbersome and expensive, but with the IFSC route, it becomes much easier. This presents an additional investment opportunity for Indian investors with a straightforward process and low costs. Plus, investors have the option to trade in fractional quantities, unlike the underlying shares traded in US markets. Additionally, investors can hold the depository receipts in their own demat accounts opened in GIFT City and are entitled to receive corporate action benefits related to the underlying stock.
Lastly, let’s talk about trading holidays for these receipts. Most trading holidays for NSEIFSC Receipts on US stocks align with US trading holidays. However, some Indian holidays are also included. In 2022, the upcoming holidays include Good Friday on April 15, Memorial Day on May 30, Juneteenth National Independence Day on June 20, US Independence Day on July 4, Indian Independence Day on August 15, Labor Day on September 5, Diwali on October 24, Thanksgiving Day on November 24, and Christmas on December 26.
In conclusion, the introduction of trading US stocks through NSE IFSC marks a significant milestone in India’s financial landscape. By offering NSEIFSC Receipts, the exchange provides Indian investors with easier access to global markets, enabling them to diversify their portfolios and explore new investment opportunities. With simplified processes, lower costs, and the ability to trade in fractional quantities, retail investors stand to benefit greatly from this initiative. Moreover, the alignment of trade timings with US markets enhances convenience and flexibility for traders. As the platform expands its offerings and increases the number of tradable stocks, it is poised to become a key avenue for international investment in India. Overall, this initiative underscores the commitment to fostering innovation and growth in the financial sector, ultimately empowering investors and strengthening India’s position in the global market.
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