Indian stock exchanges are examining whether Singapore Stock Exchange’s (SGX) latest announcement violates the decision taken earlier this year on offering data feeds to foreign exchanges. The reaction came on the heels of SGX indicating the listing of fresh India equity derivative products later in June so that it could continue to offer India risk management exposures to market participants. At the same time, the exchange disclosed the decision to delist all derivatives contracts since it was based on an alliance with the National Stock Exchange (NSE).
Though SGX did not disclose it explicitly, it was quite clear from its circular that it would continue providing Nifty futures and options trading, albeit under a different name. The new name of the product would be known as India futures and India options for which the Singapore exchange would use Nifty’s closing price to settle its contracts. The exchange appears to have taken a calculated one as any legal issues would not be beneficial to Indian stock exchanges.
A livemint report quoted a source as saying that “The legal departments of exchanges are examining it to see whether there is a violation and the next course of action will depend on that. This also came as a surprise to Indian exchanges as SGX was in talks for a connect with Gift City.” The past judgment does not prevent any exchange from taking the closing price of another exchange.
In a press statement, SGX indicated that it was working with NSE to establish a connection between Gift City and the exchange. But, the SGX thinks that the August deadline for Gift City is not a realistic one and pointed out that its agreement with NSE to use Nifty trademark will come to an end in August. Therefore, it was left with no alternative but move ahead in announcing a fresh set of contracts. This is to make sure continuity for its market participants.
Reacting to the development, U Trade Solutions’ Kunal Nandwani stated that institutional investors would not be worried by the new product name since such product would be routed through SGX only. However, he thinks that the upcoming period could provide details on the trade volume and open interest that the Singapore exchange could capture by virtue of its new product.
NSE Might Resort To Legal Actions
For its part, NSE might resort to a legal course of action as the exchange canceled its licensing deals in February for offering indices and securities-related data feed services meant for trading platforms of foreign exchanges. However, it will be tough to get a favorable judgment if the NSE goes to court based on the past judgment in the NYMEX versus ICE case.
In the NYMEX-ICE case, Judge John Koeltl declared that it was not a copyrighted work of settlement prices. Therefore, IntercontinentalExchange Inc (ICE) did not infringe any copyright or trademark in referring NYMEX’s settlement prices for derivative contracts in OTC. In the current situation too, SGX would take a cue from the ruling to stress its point.