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Even as the National Stock Exchange (NSE) weighed its options to protect its turf after Singapore Exchange (SGX) pulled one off on it by launching a series of independent India-based equity derivative contracts, market veterans marvelled at the product innovation SGX appears to have accomplished.While exact details of the new products are not available, SGX simply said: "The reference value (for the new India contracts) will be the average of the final settlement prices of futures contracts traded on relevant exchanges that each: (i) references a broad-based India equity index covering 50 stocks listed on National Stock Exchange of India, which captures approximately 65 per cent of its float-adjusted market capitalisation; and (ii) has the same last trading day as the expiring SGX India Futures Contract.
The Relevant Exchanges are: (i) NSE; and (ii) NSE IFSC Exchange."“I think it is one of the most brilliant innovations that they have come out with.
There is no underlying so nobody can fight with them,” said Samir Arora, an Indian market veteran who now heads the Singapore-based Helios Capital.“All they are saying is that on the last day, we will give you the Nifty price.
It has no underlying.
Let us see how the world accepts it.
It is a contract with no underlying, except that on the last day it becomes Nifty.” The theory of finance is that there are two things in futures, the same that today they are the same.
So, it is a brilliant legal manoeuvre.
Let us see how it works.
But it is very exciting.
It is good, he said.The move by the Indian exchanges to stop providing licences and data to foreign bourses had not gone down well with foreign investors.
MSCI, the US-based index provider, had termed the move “anticompetitive.” It had warned that this could impact India's weightage in its indices, which are used by overseas asset managers to construct exchange-traded funds (ETFs) and benchmark portfolios.June 4 will be called India futures and India options, and they will replace all Nifty-related contracts.This will “provide market participants with continuity and the ability to seamlessly transition their current India risk-management exposures,” SGX said in a press release.
“These products also add to the existing India single stock futures offering, which has garnered active participation from global institutional clients since its launch, demonstrating the demand for access products.NSE said it will determine the course of action after discussions with other exchanges and the regulator.
Another NSE official said it will take legal action if the new product violates its terms and conditions.
“SGX cannot use our data without our permission," an NSE official said.Arora said the SGX contracts have huge relevance for foreign investors.
If two foreigners have to trade between each other, why should they go to India and pay 30 per cent tax he asked.“If we do a single stock, we do not use it as much.
But we just enjoy brilliant manoeuvres because we are analysts.
We analyse many things and we enjoy and that is how we cannot survive in this world for 20 years.
You should enjoy the business of finance,” he said.
