The latest cross-exchange initiative comes from India’s National Stock Exchange (NSE) and Singapore Exchange (SGX) which have together agreed to introduce a futures contract that will be based on Indian sector indices and traded on SGX.
The move is seen as a first as Indian sector indices are being launched outside of the country, while traders have enjoyed speculating on CFD contracts that aim to track major Indian indices such as the Nifty50 for some time already.
SGX intends to add four index futures based on Nifty Bank Index Futures, Nifty IT Index, Nifty CPSE index, and Nifty Madcap 50. They will be denominated in USD and will contain the SGX prefix in the product description to differentiate from the same products available in India’s markets.
Four new contracts planned
“The continued success of our existing India-linked risk management products is testament to offshore demand from investors to access the India opportunity as well as SGX’s ability to pioneer offshore derivative contracts,” said SGX CEO Loh Boon Chye. “We will continue to be innovative in facilitating investor participation in India and we thank NSE for its continued partnership, which has been important for our ability to help internationalise the Nifty brand,” he added.
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The press release noted that trading volumes grew 30% year-on-year during 2015 and reached USD360 billion, while SGX’s INR/USD futures contract is also SGX’s most active FX futures contract with more than USD750 million notional traded per day. Therefore the existing capital flows could benefit the new product launch as a means to differentiate between existing and planned exposure.
As per the update, SGX Nifty IT Index Futures and SGX CPSE Index Futures will go live on March 29th, followed by SGX Nifty Bank Index Futures and SGX Nifty Midcap 50 Index Futures in the middle of the year.
India Sector Futures outside of India
The launch is expected to help broaden SGX’s related product offering and provide offshore investors access to more tailored trading opportunities in what is described as one of the world’s fastest growing economies.
Commenting in the joint press release regarding the synergy, Ms. Chitra Ramkrishna, Managing Director and CEO of NSE, explained: “We are pleased to extend our relationship with SGX and support the expansion of SGX’s Nifty product suite. This is aligned with the continued participation of foreign portfolio Investors in India. India’s economic growth, unique demographic profile, foreign direct investments and government initiatives are helping to drive the banking and IT sectors, as well as supporting the growth of the public sector and mid-cap companies. Derivatives on these new sector indices will provide useful tools for offshore investors to benefit from these trends and also to manage market movement.”