SEBI boosts stock trading on GIFT

Yet again, there is a scare of equity volumes shifting to an offshore destination. This time however, it is not Dubai or Singapore. Experts believe, over the next few months, sizeable equity derivative volumes could shift to the Gujarat International Finance Tech (GIFT) City, India’s first offshore trading venue.

SEBI, on Thursday, provided tailwind to GIFT by approving derivative contracts on more number of stocks to be traded there. The move puts all the stocks in the Sensex and the Nifty on the GIFT platform to be traded in derivatives.

Stock brokers said the regulator’s Thursday announcement has made bourses in Mumbai vulnerable to competition from GIFT, which is almost like a tax haven.

Huge savings in statutory cost is the key attraction of the GIFT platform, which is exempt from securities transaction tax (STT) and stamp duty. Both these together form 50 per cent of the levies on equities trading in Mumbai. What more? There is no short-term capital gains tax on equity transactions if traders have a base in GIFT premises, which makes trading almost free. In the context of SEBI’s recent ban on participatory notes (P-Notes) on derivatives, the GIFT platform becomes a proposition that cannot be missed. Only foreign and domestic financial institutions can trade on GIFT.

“SEBI’s move is a game-changer for the GIFT platform,” said Deven Choksey, promoter, KR Choksey Investment Managers. “Equity volumes that shifted to Singapore and Dubai may come back as derivatives trading picks up on GIFT and even the talent pool will return here.” The 52 stocks that are now allowed on GIFT account for nearly 55 per cent of market capitalisation and 70-75 per cent of the portfolio of most institutions.

Vikram Limaye, MD & CEO, NSE, said, “This will enhance the offering of NSE’s platform in GIFT and also give it a competitive edge among other international destinations. Liquidity will surely build on the GIFT platform in the coming months and the fact that SEBI is supportive is encouraging.”

V Balasubramaniam, MD & CEO, India INX, BSE’s GIFT platform, said, “It is a step in the right direction by SEBI. Stocks allowed in GIFT have a major share in the economy and are also the most trading volume generators.”

Yet, the rupee-dollar pair on the GIFT platform is much-awaited by traders as that would give them a legitimate hedging tool. The RBI is averse to it as the rupee is not fully convertible and trading on GIFT is dollar-denominated. Derivatives in index futures and commodities, including bullion and metals, are other offerings allowed by SEBI in GIFT.

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