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Singapore bourse SGX and India's National Stock Exchange (NSE) are in favour of allowing brokers from Hong Kong to trade on the Gujarat based GIFT City platform, which is being promoted as India's tax free offshore destination. Sources told BusinessLine that senior officials from SGX and NSE discussed the matter with Injiti Srinivasan, chairman, International Financial Services Centers Authority (IFSCA), the regulator for GIFT City.
Chinese angle: Govt nod needed
However, allowing Hong Kong brokers to trade in GIFT City may attract additional government scrutiny due to China’s claim over the country as a special administrative region, sources said. In April 2020, India issued a Press Note 3, which requires Chinese investments to go through government approval routes, irrespective of the sector.
To ensure that indirect investments from these countries are also routed through different jurisdictions such as Mauritius are covered as well – the press note specifies that it applies to beneficial ownership of such investment in the specified countries. Further, Para 3.1.1(b) of the press note specifies that any change in the existing ownership of FDI in Indian entities resulting in the beneficial ownership falling within the purview of Para 3.1.1(a) will also require government approval.
To bring back volume from SGX
Nifty index futures, which is India's largest trading derivative contract, is listed on the SGX and attracts billions of dollars worth of trading. But Indian government has been trying to bring back trading volumes to Indian markets from SGX. For this, NSE-SGX have been working on a project called GIFT Connect, wherein SGX-SPV (special purpose vehicle) will be admitted as a trading member of NSE IFSC. Those registered on SGX will be able to trade on NSE's GIFT platform via the SPV.
A large number of brokers from Hong Kong are known to churn huge volumes on the SGX, which also has a tax treaty with Singapore. Sources said that Hong Kong brokers are keen to trade on GIFT City via SGX but want the GIFT authorities to join the International Organization of Securities Commissions (IOSCO).
IFSCA, SGX and NSE did not respond to an email query.
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