I heard about NSE and BSE starting international exchanges coming up in GIFT city, but Indian retail traders won't be allowed to trade? No mention of retail Indian trading on this article on Moneycontrol. Why is that?
The way the international exchanges are set up in GIFT is like say how the free trade zone works in Dubai. It is called IFSC or International Financial Service Center. It is a special economic zone, No STT, CTT, etc. Only MAT (Minimum Alternate Tax) of 9%.
It is an international financial service center, so all business transactions will take place in foreign currencies. So even though the exchange is situated within India, it is as if it were outside the country.
Resident Indians, under Liberalized Remittance Scheme ( LRS), are allowed to invest upto USD 250,000 per year outside India. But this money can be used only to buy stocks, real estate, or any asset which doesn’t have leverage (so no F&O trading).
Currently the BSE international exchange (IndiaINX) is allowing trading of derivatives only and not equity stocks. Hence, Indian retail clients would not be able to trade on this exchange.
This exchange will hopefully attract the FII crowd that otherwise trades Nifty on the Singapore or Dubai exchanges. NRI’s have to go through the painful custodial participant route to trade F&O on NSE/BSE, but an international exchange will make it very simple for them.
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I recently came across an article which mentioned about a new RBI Notification that has allowed Remittances to IFSCs in India (aka GIFT City) under LRS for resident individuals.
Also, IFSCA recently did away with the 1 Million USD net worth requirement for resident individuals (likely after RBI came out with the Notification referenced above) that was introduced back in November 2020
If the exchanges in GIFT City (like India INX and NSE IFSC) introduce trading in foreign companies via IDRs or some other means in the future (which is a thing that both exchanges have on their roadmaps), wouldn’t it be better to invest outside India via them?
Does Zerodha have plans to take membership in those exchanges (aka India INX and NSE IFSC)?
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I guess Zerodha along with hundred of other brokerages may have membership in gift city for proprietary purposes.
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Yeah, we do have plans once foreign stocks are allowed to offer for retail Indian residents.
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Came across a recent consultation paper issued by IFSCA which shares draft legislation for issuance and listing of various securities in IFSC aka GIFT City (including IPOs, secondary listing, SPAC listing, etc).
Zerodha registered a subsidiary in Gift City -
https://www.zaubacorp.com/company/ZERODHA-IFSC-PRIVATE-LIMITED/U65990GJ2021PTC122750
So Zerodha has registered on Gift City …what benefit do we get ?
Probably for prop trade or maybe market making. Lots of brokerage firms are registered there.
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No plans as of now for retailers, but plan is eventually it may be.