Offshore nifty trading now in Gift city

Subject :Economy

Section: Monetary policy

Context: Offshore-traded Singapore based SGX Nifty now becomes Gift Nifty

Key Points:

SGX Nifty is the NSE based derivative that was traded on the Singapore exchange. The ability to trade in the country based derivative allowed market participants to manage their risks and to take positions without any capital transfer to India.
After the resolution of a legal dispute between Singapore exchange and Nifty, now the whole trading of the NSE based derivatives has been transferred to India. The GIFT (Gujarat International Finance Tec-City) city in Gujarat (an international financial city) will provide similar status to trades as was in Singapore.
The exchange will be operated by NSE International Exchange IFSC Ltd (NSE IX)
Significance:
- This will see a spillover of better price discovery, with India assuming the role of price-setter, thanks to 62 domestic entities initially taking part in trading along with foreign investors
- Trade in four index-based derivatives: Gift Nifty, which is the most actively traded, Gift Nifty Bank, Gift IT, and Gift Nifty Financial Services.
Indian broker subsidiaries can sign up funds, foreign portfolio investors, non-residents and family owned offices of wealthy Indians as clients. Apart from running proprietary trades, they can trade on behalf of clients too.
Ordinary citizens cannot trade in GIFY Nifty, as under the Liberalized Remittance Scheme (LRS), the Reserve Bank of India (RBI) disallows the use of the $250,000 per person per year limit for leveraged trades, including futures and options.

The new GIFY Nifty

Singapore Exchange Ltd (SGX) transferred the order book of SGX Nifty to NSE IX effective 3 July, under an agreement called the liquidity switch from Singapore to Gift City.
SGX will continue to clear trades of investors trading in Gift Nifty from Singapore through a special-purpose vehicle.
The book transferred to Gift comes with outstanding trader positions of $8.04 billion worth of Nifty futures compared to domestic Nifty futures outstanding positions are worth over $2 billion. (Outstanding positions called open interest refer to the flow of money into a market. Higher the open interest, the greater the liquidity.)
The greater liquidity in SGX Nifty is owing to it having a head start in 2000 while index futures which in India were launched in 2001. This was further helped by lesser regulations in Singapore.
Trading on the NSE IX will run for around 20 hours and 15 minutes through two sessions—6:30am-15:40 hours and from 16:35 hours to 2:45am the next day from Monday through Friday