What is NSE IFSC-SGX Connect, how it will work? Here's all you need to know

NSE IFSC-SGX Connect is a collaboration between the NSE and the Singapore Exchange (SGX) to bring global investors to India

Prime Minister Narendra Modi launched NSE IFSC-SGX Connect on July 29, 2022 at the International Financial Service Centre (IFSC) in GIFT City, in Gujarat’s Gandhinagar.

During the launch, Modi said, “India is now integrating with the global supply chain and GIFT City is one of the major gateways."

What is NSE IFSC-SGX Connect?

To understand this, let us break the above question into smaller parts. To begin with, let us discuss what is an IFSC.

IFSCs serve customers outside the jurisdiction of the local economy. It helps to deal with the flow of finance, financial services and products across borders. According to the Finance Ministry, “An IFSC enables bringing back the financial services and transactions that are currently carried out in offshore financial centres by Indian corporate entities and overseas branches/subsidiaries of financial institutions (FIs) to India by offering business and regulatory environment that is comparable to other leading international financial centres in the world like London and Singapore.”

India’s first IFSC has been established at GIFT City in Gujarat.

What is GIFT City?

GIFT City (Gujarat International Finance Tec-City) is located on the banks of the Sabarmati river in Gujarat in between the Business capital (Ahmedabad) and Political capital (Gandhinagar). It is being developed as a smart city for global IT Services and Finance. It is constructed on 886 acres of land where 62 million sq. ft. of the Built Up area will be developed with 67 per cent of commercial space, 22 per cent of residential space, and 11 per cent of social space. GIFT City has two Zones: 625 acres of land marked as Domestic Tariff Area (DTA) and 261 acres of land marked as Multiservice Special Economic Zone (SEZ).

All the rupee-denominated transactions in GIFT City are undertaken from DTA.

What is NSE IFSC?

NSE IFSC Limited (NSE International Exchange) is a fully-owned subsidiary company of the National Stock Exchange of India Limited (NSE). It acts as a gateway for one to invest in international stocks thereby, it helps in diversifying their investment portfolio with global stocks. NSE IFSC started trading at Gujarat International Finance Tec-City (GIFT) in June 2017 with an aim to grow the Indian financial market and bring capital into the country.

NSE IFSC offers trading in products including Currency Derivatives, Index Derivatives, Stock Derivatives, and Commodity Derivatives.

NSE IFSC-SGX Connect

NSE IFSC-SGX Connect is a collaboration between the NSE and the Singapore Exchange (SGX) to build stock index-based products from GIFT city and to bring global investors to India. It aims to create a larger pool of liquidity for products and bring international participants to India.

Connect brings together Gift participants and trading members of SGX who invested in NSE-listed Indian securities via SGX. All orders on Nifty derivatives by SGX members will now take place through NSE-IFSC’s order matching and trading platform.

“Through SGX Group’s unique trading infrastructure in GIFT City, investors in India and around the world can now trade Nifty contracts listed on NSE IFSC seamlessly and efficiently with global risk-management and clearing standards,” said NSE in a statement.

Connect is powered by TCS’ (Tata Consultancy Service) flagship solution TCS BaNCs. The TCS module will coordinate with the clearing arms of SGX and NSE IFSC for position and limits management and also perform regulatory compliance functions. The module enables SGX to define risk rules and profiles and control trading activities.