The NSE and Singapore Exchange (SGX) have received all regulatory approvals to launch SGX Connect, a new joint platform that is likely to be functional from the NSE International Exchange at Gift City in Ahmadabad towards the end of 2020. The announcement Tuesday formally ends the long bickering and an arbitration case at the Bombay High Court between the two large exchanges in Asia that traces the problem to a February 2018 statement by NSE that it would end the joint platform--SGX-Nifty-that used to trade NSE’s offshore equity derivatives, from October 2018.
Subsequent talks between the two did not yield any results. Soon, the BSE had also decided to stop supplying its derivatives to its foreign partners as part of an attempt to prevent more of the domestic equity derivatives market from going offshore. In fact, the domestic exchanges were prodded by Sebi and the RBI as huge offshore volumes were leading to very high volatility in the onshore rupee and futures markets. The move prompted SGX to seek legal remedies against NSE and in April 2018 SGX also decided to launch Indian single-stock options despite NSE's objections which further created a rift between the two and in May 2018 both the parties moved Bombay HC seeking an arbitration award.
The next month, the HC asked NSE to allow its derivatives to be allowed to be traded on the SGX in the interim. In March 2019, the Bombay HC extended NSE-SGX arbitration deadline to December 31, 2020 as both the parties sought more time to settle the dispute. It can be noted that Nifty futures contracts on the SGX were very popular among foreign portfolio investors looking to trade in dollar-denominated products and not wanting to register with Sebi. And at its peak in 2016, SGX Nifty volumes were 1.4 times higher than those on the onshore NSE platform. In February 2019 only 1.6 million contracts of SGX Nifty were traded on the futures market on SGX.
SGX Nifty futures volumes are down 27 percent since February 2018, when domestic bourses first announced their plan to end data sharing and licensing pact with their global counterparts. In February 2019, both the bourses had submitted a joint proposal to the Sebi seeking permission to resume such an arrangement. The SGX Connect aims to bring together trading on Nifty indices at IFSC and create a larger pool of liquidity comprising international and home market participants..