Derivative contracts with a notional value of about £5.29 billion traded in Singapore will shift to India as a cross-border trading link between the two Asian countries' top bourses gets fully operational.
On July 3, SGX Nifty, the Singapore Exchange-traded futures on India's major stock NSE Nifty 50 Index, will change its name to GIFT Nifty, and all pending orders will be moved to GIFT City, the new financial centre in Gujarat.
Mumbai now has a National Stock Exchange division dedicated to trading derivatives. There is no better time than now. As India's two most important indices, the Nifty 50 and the Sensex, continued their record-breaking run to new all-time highs, concerns that the move would reduce liquidity subsided.
The rally has made India the world’s fourth-largest equity market. The influx of foreign investment should support demand for futures contracts. SGX Nifty futures had a daily average turnover of about $3.9 billion notional last year. Average open interest was two and a half times that.
The futures accounted for the second-largest chunk of the Singapore Exchange’s equity derivative volumes, after the SGX FTSE China A50 Index futures. Large volumes of orders from Singapore will now be routed into India. SGX and NSE will split costs and revenues roughly equally. Fees and profits for the Indian exchange and local brokers should rise. India wants to become a bigger presence in global markets. The local financial sector has been growing faster than expected. New listings hit a record last year.
An increasing population helps to support the financial sector. With 1.4 billion inhabitants, India has surpassed China as the world's most populous country. Economic growth in India for the current fiscal year is expected to be 5.9%. China, which is experiencing record-high young unemployment and tensions with the US, is now behind in that statistic.