
NEW DELHI/MUMBAI Indian stock exchanges will stop licensing products and data to overseas bourses, a move that has sparked concerns in Singapore and elsewhere about market access and potential trading disruptions.
The Indian exchanges made the decision on Feb. 9, looking to limit the migration of trading volume to Singapore, Dubai and other foreign locations.
The U.S.-based Futures Industry Association cited "serious concerns" for its members related to the announcement by three key Indian exchanges: the BSE, formerly the Bombay Stock Exchange; the National Stock Exchange, which is India's largest; and the Metropolitan Stock Exchange.
"As the leading trade association for the global listed and cleared derivatives markets, FIA is a strong advocate for open and accessible markets worldwide," the group said on Feb. 11. "We believe that accessible markets are essential for the optimal growth and development of liquidity and allow customers to hedge their risks and manage their exposures in the most efficient way possible."
The Indian equity bourses halted data sharing with foreign rivals and ended licensing agreements immediately, subject to a six-month notice period.
"The volumes in derivative trading based on Indian securities including indices have reached large proportions in some of the foreign jurisdictions, resulting in migration of liquidity from India, which is not in the best interest of Indian markets," the three bourses said in their statement.
But Tushar Mahajan, Nomura's India head for listed futures and options, believes that the intention of the government is to make foreign investors pay taxes in line with Indian investors and to ensure foreigners open direct accounts in India. "Also, as regulator or government, you don't want the market to shift offshore from where your primary market is," he said.
Mahajan reckons that the "immediate impact of the move will be that some foreign investors who may not have direct India trading accounts and those who trade India sporadically could just skip India trading because it makes access for foreigners difficult." He said that almost 52% of open interest in the NSE's Nifty futures is from the Singapore Exchange, which makes it as big as the onshore market.

The Singapore Exchange, which offers the popular SGX Nifty 50 index futures under a licensing agreement with the National Stock Exchange, assured traders on Feb. 11 that its pact with NSE "will ensure the continuity of listing and trading our Nifty suite of derivative products till August 2018 at a minimum."
SGX Nifty tracks the NSE's benchmark Nifty 50 index of the top 50 stocks, while S&P BSE Sensex -- an index of the top 30 companies -- is traded on the Dubai Gold and Commodities Exchange.
"SGX wishes to assure market participants that we will take all measures to maintain orderly trading and clearing of SGX India equity derivatives for our global clients," the SingaporeExchange said, adding that it will develop and launch new India-access risk management solutions, with details to be announced shortly.
Though the futures association has yet to analyze the implications of this move by the Indian bourses, the group said it appears likely to disrupt trading on numerous exchanges worldwide and alarm international investors.
"We look forward to discussing this announcement with the Indian exchanges and working with our members to more fully understand the consequences for derivatives markets and their customers," the association said.