SGX, NSE restart talks on India's offshore hub

Singapore

DISCUSSIONS between the stock exchanges of Singapore and India over a potential tie-up on India's offshore hub are back on the table.

The Singapore Exchange (SGX) said on Tuesday that it has resumed talks with India's largest bourse, the National Stock Exchange of India (NSE), on the potential collaboration in India's fledgling finance hub, the Gujarat International Finance Tec-City International Financial Services Centre (GIFT IFSC).

The talks had fizzled out amid a deepening rift between the two sides over a plan by the Singapore Exchange (SGX) to launch new India derivative products.

The two parties have been engaged in arbitration proceedings over the planned listing of these derivative products, which the SGX had planned to roll out in June to make up for the imminent loss of its flagship Nifty 50 futures products, with India's having pulled the plug on the licensing agreement for that in February.

Relations appeared to have further soured after the NSE filed an interim injunction on May 21 and got its way at the Bombay High Court to bar the SGX from launching the derivative products; the court had also ordered the matter to go to arbitration.

Now, with the two exchanges coming around to talk once again on the tie-up which, it is hoped, would lend a boost to the ambitious project on the subcontinent, the SGX said that the arbitrator has granted a deferment of the arbitration proceedings between SGX and NSE's index company IISL.

The SGX said: "SGX and NSE will jointly engage and consult relevant stakeholders on the proposed collaboration."

The directions under the arbitration order, however, remain effective.

The resumption of talks follows a discussion by the regulators of both countries on Monday. Various issues were discussed, including the "amicable resolution" of the NSE and SGX issue, said the Monetary Authority of Singapore and the Securities and Exchange Board of India (Sebi) in a joint statement.

The regulators agreed to further strengthen their collaboration to benefit their capital markets, while also agreeing that NSE and SGX "would carry out necessary discussions to come up with a solution that is acceptable to both the parties".

The fight between the two exchanges began in February, when the NSE pulled the plug on offshore derivatives trading linked to Indian indices, by scrapping the data feed and licencing agreements with foreign exchanges. SGX, which counts the Nifty 50 futures products as one of its most popular offerings, was the hardest hit.

India cited volumes in derivatives trading that have reached "large proportions" in foreign jurisdictions, causing the migration of liquidity from India, as a reason for the decision.

The uncertainty over the impact on earnings and the subsequent chain of events in this dispute have taken a toll on SGX's stock; it went from trading at a high of S$8.50 in January this year to a low of S$7.05 in early July, with some analysts describing the sell-down as "overdone".

On Tuesday, the stock SGX rose 2 Singapore cents or 0.3 per cent to finish at S$7.52.

Earlier, SGX was to have had until August - following the licensing agreement with NSE - to continue the listing and trading of Nifty contracts. However, it announced in mid-June that it had been granted an extension beyond this timeline "for at least two successive contract month maturations beyond the arbitration's completion date" under an order passed by the arbitrator.

The SGX was also directed to refrain from offering new India equity derivatives products.