Recently on 3 July 2023, the SGX Singapore Nifty was rebranded as the GIFT Nifty; after years of efforts and dedication, and willingness to achieve the set goal, the NSE (National Stock Exchange) of India has successfully developed a new international financial hub in the capital city of Gujarat, Gandhinagar.
As a result of this rebranding, all the derivative contracts (including futures contracts) will get shifted to Gandhinagar, Gujarat. The total value of this segment is said to be worth $7.5 Billion. This type of step is one of its kind in the history of the financial market; it reflects international connectivity, creates more opportunities for all types of traders, and ultimately promotes mutual growth.
The decision to rebrand the financial vehicle was due to many economic factors. Among them, one is, it can be considered as cash-settled after moving to the GIFT City. Many existing and potential inverters & traders are attracted by this cash settlement of the contracts at the time of expiry.
Before knowing other benefits and reasons or needs for doing this rebranding, let us briefly see what a GIFT Nifty is.
GIFT Nifty is a rebranded version of the SGX Nifty as all the open positions of Nifty have been transferred to IFSC with effect from 3 July 2023. While trading with GIFT, city traders may use any currency of the world except the Indian rupee.
Also, the US-Dollar dominated Nifty contracts will be traded in GIFT city Gandhinagar instead of the Singapore exchange. The MD and CEO of the NSE IX V Balasubramaniam, has described this event as a "watershed moment," it is one of its kind.
Another reason to necessitate this rebranding was to boost the trading environment within the tech city of Gujarat. It will help welcome more traders and investors into the financial market.
Those who are very concerned about the taxes have good news with this rebranding procedure, as the NSE IX operates out of an SEZ, which allows them to get exemptions from the securities transactions Tax (STT), commodity transaction tax, dividend distribution tax, and also capital gains waivers. Thus, they can trade without worrying about the percentage of taxes.
With any change comes resistance to acceptance; the same is visible for this rebranding. Many investors have welcomed it whole-heartedly as they can see the benefits on a big scale, while some are still resisting and stating their concerns, such as less liquidity and a risk of data manipulation and more.
The success or failure is dependent on time. We can only judge after a few months or a successful completion of a year. However, the authorities have mentioned their vision and objective of making GIFT City one of the significant international trading centers.
There are some notable changes with this rebranding of SGX Nifty to GIFT Nifty; find them below:
The number of products under its umbrella:
The GIFT Nifty has four products under its umbrella: GIFT Nifty 50, GIFT Nifty Bank, GIFT Nifty financial service, and GIFT Nifty IT derivative contracts.
The trading hours are extended more than the Indian standard trading hours and are divided into two parts to ease transactions. It will also provide traders some time to think, analyze and react to the trend. The first half trading time will be 6:30 am IST to 3:40 pm IST, and the second half is from 4:35 pm to 2:45 pm.
Market expansion on a global level:
The collaboration of two giant players, NSE -SGX, will help global investors to participate in the Indian capital market through NSE IX at Gandhinagar. It will increase global reach, and cash flow will also improve.
Smooth transition process:
The process of placing the order and conducting the trades has remained the same, so traders and investors will not have any problem with the transition. The majority process remains the same as earlier.
Assignment of work between the two authorities:
It is decided that the futures contracts will be trading in GIFT city Gandhinagar, while the Singapore exchange will do the clearing process.
Participants of GIFT Nifty:
As per the NSE IX, those registered with Indian or foreign offices, having the licenses, can trade in the GIFT Nifty products. Over 50 brokers are currently having their units in GIFT City. They have permission to trade for themselves and also on behalf of their clients.
Further, as per the RBI’s LRS - Liberalised Remittance Scheme, Indian retail investors would not have a chance to trade in GIFT Nifty.
Lastly, SGX IFSC India has developed a special-purpose company at Singapore Exchange that will facilitate the transition of open positions in their exchange to the NSE IX; the process has already been started. Those executed trades will be cleared through the NSE IFSC - NICCL clearing corporation.
This partnership has marked a significant milestone in the Indian financial system. It will encourage global investors to exploit one of the fastest-growing economies in the world.
We are excited to witness tremendous growth, High liquidity, and much more benefits with this vast revolutionary step and the best future in this segment for future generations.