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The Singapore Stock Exchange (SGX) is beating the National Stock Exchange (NSE) at its own game, or rather, product. Data show that in 2021 the SGX overtook the NSE in Nifty futures trading by a wide margin.
In terms of sheer volumes, on average the SGX generated nearly double the Nifty futures volumes daily compared with the NSE while its open interest (OI) was 3.38 times higher. OI refers to outstanding or unsettled derivatives contracts. A higher OI denotes higher trading interest.
BusinessLine had reported on December 14 that SGX also became the largest offshore venue for trading rupee futures in 2021.
Nifty-50 is the NSE’s flagship equity index, which the exchange promotes as the ‘stock of the nation’ as it alone generates 50-70 per cent of the entire derivatives volumes in the Mumbai market. But foreign funds have popularised Nifty trading in Singapore as the index is also listed on the SGX by virtue of a licensing agreement it has with the NSE.
In 2021, the SGX reported trading of 95,130 lots of Nifty futures on its platform on an average daily. In comparison, 1,72,438 lots of Nifty futures were traded on the NSE during the same time. A comparison of the lot size of Nifty futures on both the exchanges show that SGX was trading nearly double the volumes than on the NSE.
Each Nifty futures lot on the NSE is worth ₹8,50,000 but its value is over three times higher on the SGX at ₹27,36,000. Effectively, the SGX saw trading of ₹26,028 crore worth Nifty futures on an average daily in 2021, purely based on the lot size. In comparison, the NSE traded Nifty futures only worth ₹14,657 crore in 2021.
The current OI of Nifty futures on the SGX stood at 2,25,419 lots while that on the NSE was 2,14,516 lots. Again, in value terms, the OI on SGX was higher at ₹61,675 crore compared to NSE's ₹18,234 crore based on the lot size.
‘Worry for policymakers’
“Higher volumes of Nifty and rupee futures on the SGX is a headache for India’s policymakers and their worst nightmare coming true. It means India’s financial markets are exported to Singapore,” a former official working with market regulator SEBI said. This also defeats the government plan to bring offshore traders to the Gujarat GIFT platform.
Experts say higher Nifty trading on the SGX indicates that foreign funds are setting the direction of Indian markets daily from Singapore. The SGX commences trading two-and-a-half hours ahead of the NSE and trades for 16 hours a day while the domestic markets trade only for six-and-half hours.
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