INSUBCONTINENT EXCLUSIVE:
By Andy MukherjeeA stock connect between India and Singapore, modeled on the popular Shanghai-Hong Kong link, died before it could be
Blame a mix of chest-thu mping nationalism on the Indian side and political naivete on the part of the Singaporeans.
Singapore Exchange Ltd
was asked by the High Court in Mumbai on Tuesday to suspend the June 4 start of its new India equity derivatives and try to settle its
dispute with National Stock Exchange of India Ltd
The NSE objects to the SGX replicating the popular SGX Nifty 50 derivative contract by using publicly available settlement prices on the
At the same time, the NSE doesn't want to maintain an 18-year-old licensing agreement with SGX
Hence the impasse.
The arbitrator will try to find a solution by June 16
But don’t hold your breath
Even Singapore’s central bank is finding it hard to conceal its disappointment
“The range of available financial instruments for investors to hedge exposures and manage risks in Indian equities will be reduced,” the
city-state’s regulator said in an unusual late-night statement
MSCI Inc., which has already made known its displeasure with the Indian exchange’s adventurism, is bound to take note.
So what alternative
is NSE offering global investors who can’t or won’t participate onshore in Mumbai Gift City
It’s a brand-new international financial center in Prime Minister Narendra Modi’s home state of Gujarat
Pushed into a corner, SGX was prepared to do a connect with Gift, but now even those plans are dead.
If deepening its markets was the real
objective, India would be pursuing a connect between Singapore and Mumbai – a more logical choice than Gift, since all major Wall Street
banks are present in those centers.
This year, investors have used the northbound pipe from Hong Kong to buy an average $900 million of
Shanghai stocks every day
Flows from Singapore into index and single-stock futures in Mumbai would have meant more wealth and jobs for the city
But plans for an international financial center in Mumbai, announced with much fanfare in 2015, are on ice, according to an
TheIndianSubcontinent report last week
Ministers and bureaucrats don’t want to talk about a rival to Gift any more, presumably because nobody wants to be seen denying Modi his
“vanity project.” That’s Percy Mistry’s characterization, not mine.
Mistry’s criticism counts
In 2007, he headed the committee that provided a blueprint for turning Mumbai into an international financial center
“All that's needed now,” as I optimistically wrote back then, “is an influential champion of the cause, someone who would keep up the
pressure on short-sighted politicians and phlegmatic bureaucrats until every single recommendation of the report has been
implemented.”
Mumbai never got that champion
But a patch of wilderness near Gujarat’s capital, Ahmedabad, clearly did
So imagine the plight of Asia equity derivatives folks at Wall Street broker-dealers, trying to convince their bosses to set up a second
office in India in a place nobody in New York has ever heard of in order to create liquidity for clients
And what a time to make that pitch: Europe is repeating its 2012 meltdown; Trump is back to threatening China with a trade war; the Middle
East is on the boil; the Federal Reserve is still in tightening mode; and investors are fleeing emerging-market risk
So India wants all its equity derivative trading to go to … the boondocks.
SGX clearly underestimated the zeal with which Gift was
If SGX hadn’t alarmed New Delhi by planning its own suite of India single-stock futures, and instead proposed a stock connect with NSE's
Gift unit, it would still be in business with the NSE
Intermediaries that deal in Indian derivatives – as well as hedge funds that use them – would have trusted the Singapore bourse, and
gone into Gift.
Now that marriage has broken down irretrievably, participants are being asked to close their eyes and jump into a new market
that’s not even properly regulated
(India’s finance minister promised to establish a unified regulatory authority for Gift and other international financial centers in his
budget speech in February; for now there is none.)
All I hear these days is how Gift is no different from Singapore
It has no capital-gains taxes; if you have an existing relationship with a big bank anywhere outside India, it could switch on your Gift
access without further “know-your-customer” hassle
It’s ironic that in order to make Gift work, India’s long-standing concerns about round-tripping of domestic cash and money-laundering
seem to have been given a quiet burial
It never stood a chance.
(This column does not necessarily reflect the opinion of economictimes.com, Bloomberg LP and its owners)
