Summary:
India and Singapore are exploring deeper NSE-SGX collaboration through derivatives and potential dual listings. The move could help Indian companies access global capital and improve cross-border market participation. Stronger linkages may also benefit exchanges and related market infrastructure businesses. However, regulatory hurdles mean the impact is likely to be gradual.
India and Singapore are set to discuss expanding the collaboration between National Stock Exchange (NSE) and Singapore Exchange (SGX), with a view to facilitating deeper participation by global investors in the Indian capital markets. The exploratory talks on derivatives linkages and potential for dual listings are expected to create more value for Indian firms by giving them access to a larger pool of capital as compared to what is available at present.
The 4th India-Singapore Ministerial Roundtable (ISMR) meeting in Singapore heard Singapore’s Deputy Prime Minister Gan Kim Yong say that the two exchanges are looking at options including derivatives products as well as “dual listing possibilities” in order to provide Indian businesses with access to global capital through the regional financial hub.
NSE-SGX Collaboration: Possible Opportunities
The proposed India-Singapore exchange-level collaboration has the potential to build on the existing linkages. Earlier this year, trading of India-linked derivatives started on SGX, providing overseas investors with exposure to Indian indices. With the launch of GIFT Nifty in July 2023, however, Nifty derivatives trading migrated to NSE International Exchange (NSE IX) in GIFT City via the NSE-SGX linkage. Given this background, the resumption of the India-Singapore exchange-level talks suggests that both sides are interested in exploring ways to leverage their respective strengths beyond the limited scope of what has been implemented so far.
Thus, among the possible opportunities for collaboration, international derivatives as well as other products and access for corporates seeking foreign investors are likely to be discussed. For instance, dual listings would give Indian listed firms the opportunity to benefit from greater cross-border liquidity, institutional awareness-building, and valuation discovery, which should help them raise capital more effectively from a larger global investor franchise. As a major financial centre in Asia, Singapore can provide Indian firms with exposure to global institutional funds as well as serve as a conduit to other international markets. These opportunities could prove to be valuable for firms that seek to raise significant capital from foreign investors.
NSE-SGX Exchange-Level Collaboration Impact: Indian Capital Markets
More broadly, stronger NSE-SGX collaboration would help in facilitating and accelerating the internationalisation of India’s financial markets. With India’s equity market growing rapidly in size and global prominence, there is a need to enable easier access for international investors who are seeking opportunities in one of the fastest-growing emerging markets.
For instance, corporates that are looking to raise capital onshore can benefit from the increased access by tapping into the pool of international institutional investors. This is likely to be of particular value for large-cap firms, technology, financial sector, and high growth companies that want to enhance their global visibility and attract foreign capital.
Moreover, the proposed India-Singapore exchange-level linkage fits in with India’s broader strategy to position GIFT City as a leading international financial centre. This is reflected in the decision to migrate SGX Nifty to GIFT Nifty as offshore trading of Indian indices moved closer to India’s domestic financial markets.
NSE-SGX Exchange-Level Linkage Impact: Players
Following the announcement regarding the renewed India-Singapore exchange-level talks on derivatives and dual listings, there was no visible reaction in the stock prices of market infrastructure companies. However, the potential for stronger collaboration between NSE and SGX has ramifications for market infrastructure players, both in India and Singapore, as well as the wider equity and derivatives markets.
As the dominant exchange in terms of equity derivatives, NSE stands to benefit from increased trading volumes, as well as data and product-related revenues, if India’s capital markets see greater participation by overseas investors. With its public listing plans, NSE is likely to benefit from heightened investor sentiment around India’s equity market development and capital market reforms, given the sustained global investor interest in diversifying into India.
Meanwhile, other market infrastructure players can benefit from increased cross-border equity derivatives trading as well as opportunities in related data, technology, and settlement services as more domestic markets become accessible to overseas institutional investors.
Potential Challenges Ahead for India-Singapore Exchange-Level Linkage
Despite the strategic intent of deeper NSE-SGX collaboration, there are several regulatory and practical challenges that need to be navigated before such a proposal can move from the ideation stage to actual implementation and execution. Thus, the potential for a broader India-Singapore exchange-level linkage will likely take time before it can yield meaningful results, if it happens at all.
In the meantime, the migration of SGX Nifty to GIFT Nifty serves as a reminder of India’s domestic interest in capturing offshore trading activity in order to capitalise on the liquidity and volumes generated by international investors. This suggests that India is unlikely to pursue a free-market approach to its exchange-level collaboration with Singapore. Rather, it appears that regulatory authorities in India will seek to balance the need for openness in order to attract foreign capital with the need to retain control in order to ensure that India’s domestic markets and financial infrastructure benefit from deeper integration with the global system. Thus, while the India-Singapore NSE-SGX talks have the potential to be significant for both economies, their impact on markets in the near term is likely to be limited.
