India court extends stay in NSE-SGX dispute

MUMBAI • The Bombay High Court extended an injunction against Singapore Exchange as it deferred hearing a dispute over plans for new offshore Indian derivatives contracts.

National Stock Exchange of India (NSE) obtained an interim order on Monday that restrains SGX from launching the products in June. The stay will remain till at least the next hearing in the case, set for tomorrow, the NSE said in a statement on Wednesday. SGX officials declined to comment.

NSE went to court to stop its counterpart from starting contracts that would replace its popular Nifty 50 Index derivatives. The Nifty futures in Singapore will end in the coming weeks after Indian bourses in February cancelled their licensing and data deals with overseas markets, a decision that drew consternation from international investors and left SGX and others scrambling to find alternatives. The contracts have become a favoured offshore product for hedging Indian holdings.

SGX's solution to the dispute was to ready the SGX India Futures for launch on June 4. The new contracts will be based on publicly available prices and market supply and demand, SGX has said, but NSE argued in court papers that they are "unlicensed products" and "identical" to the Nifty-branded futures. NSE had sought an urgent hearing without giving notice to SGX, according to the court filing.

SGX's counsel told the court on Wednesday that they were ready to appear before a single arbitrator for relief, which ought to be decided before June 4.

"It really should not come down to legal disputes," said chief investment officer Gary Dugan at Dubai-based Namara Wealth Advisors. "If Indian asset markets want their rightful position in global markets, they must accept the international competition in the derivatives markets."

MSCI CEO Henry Fernandez said his firm is "concerned, quite a lot" about the fight. The New York-based index compiler has "no problems" with efforts to develop onshore markets, but that should not mean killing offshore trading, he said in an interview with Bloomberg Television.

There were 1.65 million Nifty 50 Index futures contracts traded on SGX in April, the exchange's data show. While that was down 14 per cent from a month earlier, it was still the third-most traded contract on the bourse, behind FTSE China A50 and MSCI Taiwan offerings.

If SGX abides by the ruling, it would mean there would be no viable offshore options to hedge equities held in India. "This is not a good time for international investors to be worrying about whether their hedge strategies are valid or can be rolled," Mr Dugan said.

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A version of this article appeared in the print edition of The Straits Times on May 25, 2018, with the headline 'India court extends stay in NSE-SGX dispute'. Print Edition | Subscribe