MSCI believes the decision by India's exchanges may force foreign investors to either migrate their trading onshore to India
Global index
provider Morgan Stanley Capital International MSCI Inc on Thursday
"strongly suggested" that India's three main stock exchanges
reconsider their anti-competitive measures that restrict the accessibility of
the Indian equity market to foreign exchanges.
The National
Stock Exchange, BSE Ltd and Metropolitan Stock Exchange said last week that
they would stop licensing products and data to foreign exchanges to prevent
trading from migrating overseas.
The breadth
of the restrictions announced were "unprecedented" and could lead to
"unnecessary disruptions in trading or a potential change in the market
classification of the Indian market in the MSCI Indexes", the index
provider warned the Indian exchanges and markets regulator Securities and
Exchange Board of India.
The decision
by India's stock exchanges is likely to force foreign investors to either
migrate their trading onshore to India, with its uncertain regulatory
environment and higher taxes, or give up their exposure to a hot emerging
market.
Foreign
markets offer dollar-based derivative contracts based on Indian indexes, shares
and other securities under licensing agreements with Indian exchanges, allowing
overseas investors to gain exposure to Asia's third-largest economy without
having to trade onshore.
Those
licensing agreements were terminated with immediate effect last week, subject
to notice periods.
The most
popular of these contracts has long been the SGX Nifty 50 index futures offered
by the Singapore Exchange under a licensing agreement with the National Stock
Exchange, India's biggest exchange. It tracks the NSE's main index of its top
50 shares, the Nifty 50 index.
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