27 February 2017
INDIA’S GIFT CITY OPENS FOR BUSINESS
India throws open its doors with its new international financial center.
On 16th January 2017, Globe IFSC and Edelweiss IFSC completed the first trade on India International Exchange (INX).
INX – a subsidiary of Bombay Stock Exchange (BSE) – is part of Gujarat International Finance Tec-City (GIFT City), India’s bold answer to other global financial hubs.
India certainly has plenty of competition to overcome. Singapore and Dubai have grown in popularity and global reach in recent years.
Both have capitalized on sluggish growth in established economies and won plenty of advocates across the financial community.
If a success, GIFT City should improve India’s competitiveness against these locations and other APAC / Middle Eastern trading venues.
So, what is gift city?
The concept for the site was first conceptualized in 2007. Since then, India has spent a decade constructing the business district complete with office space, cutting-edge connectivity, new data centers and sustainable ecology.
At its core, GIFT City is an attempt to court the international financial community. A strong statement. One that says India is open for business by putting domestic and offshore traders on an equal footing.
With 3.38% of the world’s GDP coming entirely from India, lucrative trading opportunities lie within the country and the hub is being positioned as the trading ecosystem to take advantage of India’s spoils.
What does this mean for financial traders?
Despite GIFT City having some detractors, the early signs are promising. Turnover for the first several days was reportedly $600,000.
A growing number of financial organisations are migrating to its new data centers to trade in equities, currency and interest rate derivative markets. Depository receipts and bonds are planned for a future date.
INX’s technical performance is impressive. Its turn-around time is four microseconds and the exchange is open 22 hours a day.
In addition to the exchange’s technical performance and accessibility, other benefits include tax relief, simpler regulation and world-class local infrastructure. For example, securities transaction tax is not applicable within the exchange.
The only tax in effect is a 9% minimum alternative tax that has been already been reduced from 18.5% in the 2016-17 Indian budget. This is exclusive to the International Financial Services Centre (IFSC) where INX is located.
For firms considering a move to INX, this tax benefit alone significantly reduces the cost of trading within India. Another advantage is the fact traders can trade contracts in USD rather than the Rupee.
These benefits are welcomed by traders, especially considering that the country is regularly lamented for its complexity, regulatory minefield and poor network performance.
We’ve followed GIFT City’s construction for some time and planned for its eventual arrival.
For example, Mumbai Connect, our dependable ultra low-latency connectivity service in/out of India to global markets, has been specifically optimized to address the growing demand from high frequency traders (HFTs) in India and to help financial organizations take advantage of the new trading opportunities that await.
The international financial community should heavily benefit from GIFT City’s location. With only two hours of close, the exchange’s geographical position covers East and West – from the moment Japan starts trading, through to the close of the USA’s day.
Another benefit are the restrictions placed on trading availability. Trading on INX is limited to non-resident Indians and foreign investors registered with SEBI.
By having a purpose-built exclusive trading destination for global traders, participants will benefit from a more level playing field and state-of-the-art connectivity into the country.
Furthermore, India’s proximity to other APAC exchanges and those providing gateway access to the country are expected reap the rewards.
DGCX, BKC, BSE, NSE, SGX, CME and MOEX will also become more lucrative trading venues by default, especially as GIFT City grows in popularity and more companies move into available space – 94 brokers at the last count.
Ultimately, GIFT City represents a commitment by the Indian government to the global economy.
This is welcome news for trading firms that have built their propositions around international growth, especially considering the wave of protectionism that’s occurred within Western economies in recent months.
It may be early days but whether you’re assessing India as a new location or already active in the country, contact us today to learn how we can help.