Singapore Exchange shares fall 8% after Indian bourses rein in offshore trading

SGX starts trading a few hours before Indian exchanges and SGX Nifty futures are generally referred to by traders for early trading decisions

SGX starts trading a few hours before Indian exchanges and SGX Nifty futures are generally referred to by traders for early trading decisions

The weekend's developments won't impact the Indian single-stock futures, which aren't based on licensed market data from the Indian exchanges, DBS Group Research analyst Sue Lin Lim wrote in a note, citing SGX.

Shares of BSE Ltd rose as much as 1.96 per cent to the highest since February 8.

Analysts said the move would especially affect SGX's Nifty 50 index futures, which accounts for about 12 percent of its total derivatives trading volume.

"At a time when China is working hard for inclusion in MSCI, and Hong Kong, Singapore and Malaysia continue to work to improve accessibility for worldwide investors, Indian mandarins are still insular in their view believing compelled investors make value", said Shankar Char, senior vice president at Antique Stock Broking Mumbai.

In a statement on Sunday, the SGX said that the market for its entire India suite of products will open and operate as per normal on Monday.

SGX added that its licence agreement with NSE "will ensure the continuity of listing and trading" of its Nifty derivatives until at least August this year. The SGX said it will develop and launch new India-access risk management solutions to allow global participants in the SGX India equity index family of derivative products to execute their investment activities with continuity. It also noted that the two companies' partnership goes back to 2000 and that they had collaborated "to develop and internationalize India's capital markets". The details will be announced shortly.

Currently, Indian stock exchanges through a licensing arrangement provide their market data at various levels to index providers for creating Indices. SGX will work jointly with NSE towards solutions for global investors, including developing solutions from NSE's International Exchange (NSE IFSC Limited) in Gujarat International Finance Tech (GIFT) city - International Financial Services Centre.

"The existing licensing agreements for licensing indices/ prices of Indian securities for trading derivatives on foreign exchanges and/or trading platforms shall be terminated with immediate effect", the bourses had said in a joint statement.

Meanwhile, FIA in a statement said, "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". Most of the global interest in India, and inflows, comes through the MSCI Emerging Markets Index (MSCI EM) given MSCI India's 9% weightage within this index, according to market reports.

Presently, the BSE is the 11th biggest stock exchange in the world with a total market capitalization of $1.70 trillion as of January 23, 2015. It has Dollars 1.6 trillion in assets benchmarked to it.

The threat was exacerbated when the SGX said in January that it would start offering single stock futures benchmarked to Nifty 50 companies starting Feb 5.

It remains to be seen if the new curbs would force overseas investors to buy into domestic derivatives to gain exposure to India, or destroy demand from investors and hurt the NSE's reputation as an index provider.