India’s bourses to stop licensing index, stock prices

Mumbai : India’s three main stock exchanges said yesterday they would stop licensing their indexes and securities or providing data to foreign exchanges, saying such agreements had led trading to migrate outside of the country.

Foreign bourses currently offer dollar-based derivative contracts based on Indian indices, shares and other securities under licensing agreements with domestic exchanges, allowing overseas investors to gain exposure to Asia’s third-largest economy without having to trade onshore.

These licensing agreements will now be terminated with immediate effect, subject to notice periods, the National Stock Exchange, BSE Ltd and Metropolitan Stock Exchange said in a joint statement late on Friday

The most popular of these contracts has long been the SGX Nifty 50 index futures offered by the Singapore Exchange under a licensing agreement with the National Stock Exchange, India’s biggest bourse. It tracks the NSE’s main index of its top 50 shares, the Nifty 50 index.

The actions would prevent SGX from offering the contract to overseas investors, who would be forced to buy into domestic derivatives to gain exposure to India, a country that has become an emerging market darling over recent years.

“The volumes in derivative trading based on Indian securities including indices have reached large proportions in some of the foreign jurisdictions, resulting in migration of liquidity from India, which is not in the best interest of Indian markets,” the statement said.