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Context: The launch of GIFT NIFTY, formerly known as SGX NIFTY, marked a new milestone in the collaboration between India and Singapore's capital markets. The product, which is based on the NIFTY 50 index of the National Stock Exchange (NSE), began trading at the Gujarat International Finance Tec-City (GIFT City) on 3rd July, attracting more than 30,000 trades in one session.

Details

• This is the first cross-border initiative that connects the two financial hubs and offers investors access to both markets. The deal between Singapore Exchange (SGX) and National Stock Exchange (NSE) is based on a five-year agreement that splits the revenue from the product depending on the source of business.
• For transactions originating from Singapore, SGX will receive 75% of the revenue, while NSE will get 25% cent.
• For transactions originating from the International Financial Service Centre (IFSC) at GIFT City, NSE will retain 75% of the revenue, while SGX will get 25%. Once a certain volume threshold is reached, the revenue sharing will become 50:50 for both parties.

GIFT NIFTY

About

• GIFT NIFTY is the first cross-border initiative in connecting India and Singapore’s capital markets. It is a new product that allows investors to trade futures and options contracts on the NIFTY 50 Index, which is the benchmark index of the National Stock Exchange of India (NSE), on the Singapore Exchange (SGX).
• The GIFT NIFTY stands for Gujarat International Finance Tec-City (GIFT) NIFTY, as the contracts are cleared and settled at the International Financial Services Centre (IFSC) in GIFT City, Gujarat, India.
  • The IFSC is a special economic zone that offers various incentives and benefits to participants, such as lower taxes, relaxed regulations, and access to global markets.
• It is supported by the regulatory authorities of both countries, namely the Securities and Exchange Board of India (SEBI) and the Monetary Authority of Singapore (MAS).
• The GIFT NIFTY started trading on July 3, 2023 and has received positive feedback from market participants.

Objectives

• To provide more opportunities and flexibility for investors who want to gain exposure to the Indian equity market, which is one of the fastest-growing and most dynamic markets in the world.
• Enhances the liquidity and depth of the NIFTY 50 Index, which reflects the performance of the 50 largest and most liquid companies listed on the NSE.

GIFT CITY ●Gift City, or Gujarat International Finance Tec-City, aims to create a world-class financial hub in Gujarat. ●It is a planned smart city that will offer state-of-the-art facilities and services for various financial activities, such as banking, insurance, asset management, capital markets, and fintech. ●The city will have a special economic zone (SEZ) status, which will allow it to enjoy tax benefits, relaxed regulations, and simplified procedures. ●The city will also have high-speed connectivity, a green and sustainable environment, and a vibrant social and cultural life. ●The vision of Gift City is to attract domestic and international investors, businesses, and professionals to set up their operations in the city and leverage its competitive advantages. ●The city will also provide employment opportunities for the local population and boost the economic growth of the region.

GIFT NIFTY offers several advantages to investors

Longer trading hours

• The GIFT NIFTY contracts are available for trading from 9:00 am to 11:55 pm Singapore time (6:30 am to 9:25 pm India time), which covers both the Indian and Singapore market hours, as well as some of the European and US market hours.

Lower costs

• The GIFT NIFTY contracts are denominated in US dollars, which reduces the currency risk and conversion costs for international investors. The GIFT NIFTY contracts also have lower transaction fees and margin requirements than the existing NIFTY 50 contracts traded on the NSE.

Higher leverage

• The GIFT NIFTY contracts have a smaller contract size than the existing NIFTY 50 contracts traded on the NSE, which allows investors to trade with higher leverage and lower capital outlay.

Greater diversification

• The GIFT NIFTY contracts enable investors to diversify their portfolios across different markets and asset classes, as well as hedge their exposure to the Indian equity market.

Conclusion

• The GIFT NIFTY is an innovative and attractive product that offers a new way of accessing the Indian equity market. It is expected to attract more investors from different regions and segments, such as institutional investors, hedge funds, proprietary traders, retail investors, and high-net-worth individuals. It is also expected to boost the growth and development of both the Indian and Singapore capital markets, as well as strengthen the bilateral ties between the two countries.

PRACTICE QUESTION Q. What are some of the sectors that Gift City aims to attract? 1. Banking, insurance and asset management 2. Information technology, biotechnology and nanotechnology 3. Education, health care and tourism Choose the correct code; A) 1 and 2 only B) 2 and 3 only C) 1 and 3 only D) 1, 2 and 3 Answer: D Explanation: Gift City aims to attract a diverse range of sectors that can benefit from its infrastructure and facilities, such as banking, insurance, asset management, information technology, biotechnology, nanotechnology, education, health care and tourism.

https://indianexpress.com/article/explained/explained-economics/what-is-gift-nifty-which-started-trading-from-july-3-8749073/