Breathe Easy, NSE. Your Index Isn’t Exactly Star Wars
(Bloomberg Opinion) -- Is the Nifty 50 a work of art – like Star Wars?
Over the coming weeks, the National Stock Exchange of India Ltd. will assert an intellectual property right over its popular equity benchmark. It's seeking an injunction against Singapore Exchange Ltd., which wants to start its own derivative based on publicly available settlement prices of Nifty futures contracts.
Such lawsuits are nothing new in the world of index providers and exchanges.
In 2006, the New York Mercantile Exchange failed to persuade both a U.S. District Court1 and the Second Circuit Court that Intercontinental Exchange Inc. was violating the copyright of Nymex settlement prices by using them in its over-the-counter derivative contracts. The judges ruled that settlement price wasn't one expression of an idea where others were possible. Rather, it was the only way to express Nymex crude's closing price. Giving Nymex a copyright would amount to giving it intellectual ownership of… prices. And that would be ridiculous.
The whole “misappropriation” argument – another shouldn't harvest what one has sown – was the legal norm 100 years ago. However, today's judges realize that too much rights protection for things that are facts – and not creative intellectual property like Darth Vader's helmet or even his peculiar breathing – could kill finance.
He's tall, dark & sinister, with a #trademark breathing problem. Listen: http://t.co/F2TCxIRNpV #CreepyIP #StarWars pic.twitter.com/6WciNmO69I
October 6, 2014The tussle between India and Singapore over where financial risk pertaining to the former should be traded is getting tiresome. Hedge funds investing in India were perfectly happy with SGX Nifty futures; and NSE earned a license fee from SGX. But in February, NSE and two other Indian bourses ganged up, and said they wouldn't allowtheir prices to be used in overseas contracts. NSE gave SGX six months to wind up an 18-year-old product.
MSCI Inc. lashed out against the move, saying it could threaten India's emerging-market classification. SGX, meanwhile, found a clever workaround to protect its own revenue. Its new contracts would merely take published settlement prices of NSE's contracts on the last Thursday of every month and be called SGX India futures. All investors will know that what they're really dealing in is the Nifty 50, except NSE won't get any license fee.
Now that the June launch is approaching, NSE has gone to court. Suppose it does succeed in getting an injunction and also finds a way of enforcing it in Singapore. SGX won't be the only loser. Global money managers will also be affected. Come June 4, there will be no SGX Nifty. If there's no SGX India futures either, investors will be forced to go direct to the onshore Indian market, or cut their exposure.
Granted, NSE broker-members can now accept U.S. customer funds for trading derivative contracts without first registering with the U.S. Commodity Futures Trading Commission as commission merchants. However, foreigners are reluctant to go anywhere near the Indian tax system. It's not just the five different levies on capital that are bothersome; dealing with a whimsical bureaucracy that thinks money raised by startups should be taxed as income is a daunting prospect.
Eventually, Indian exchanges will probably want to take overseas clients' money to a tax-lite regime like GIFT City 2 in Gujarat, Prime Minister Narendra Modi's alcohol-free home state. To this end, they're asking that the regulator allow omnibus structures, wherein an India-registered global investment bank can pool clients' funds and bring them into GIFT. The regulator simply isn't ready to deal with the money laundering that may occur when a bank hands over direct market access software to a dodgy sub-account. That risk should trump any schadenfreude from making SGX squirm.
And don't forget the Jedi out there: MSCI could still whip out a light saber if India ends up curtailing global investors' access.
NSE should really stop breathing like Darth Vader.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
- For the Southern District of New York.
- Gujarat International Finance Tech City.
©2018 Bloomberg L.P.
-
Blue Wave Will Derail the AI Trade but Won't Dismantle the AI Era | Unhedged Position
The Democrats' sweep of the US Congress will see politics collide with economic forces both over the long and short term.
-
It's Time To Take The GST Council's Bet On Trust Global
Payment records can prove India's services exports, and clear, proportionate rules can bring foreign digital sellers into the tax net.
-
Opinion | India at 38: From Innovation Overperformer to Innovation Powerhouse
India now has 453 VC-backed deep science startups, 18 of them late-stage, after 117 percent growth since 2020. Laurus Labs, at USD 9.3 billion, is the most valuable deep science company in any middle-income economy outside China.
-
Navigating Energy Crossroads: S Jaishankar's Call For Diversified Supply Chains At G20 Ministerial Meeting
As geopolitical fault lines continue to test maritime trade routes and commodity flows, Jaishankar's message remains pertinent: true economic resilience requires open markets, protected transit lines, and a genuine commitment to multilateral cooperation rather than coercion.
-
Indians Are Travelling, But Not Every Journey Is A Holiday | The Week In Whys
Pilgrims, patients and working women are the real travellers, and the system hasn't quite caught up with them.
-
Getting To Work Costs Women More | The Reason Why
It is not just about women paying more than men. It is about women paying much more in cities than in villages.
-
AI Bias In Investing Cannot Be Eliminated, But It Can Be Governed
Framing is a particularly important example as identical financial information presented in terms of gains rather than losses can lead an LLM to reach a different assessment.
-
Joining The Dots | Dark Skies, Steady Diya: Why Hope Holds This Diwali
With war, a weak rupee and foreign outflows weighing on sentiment, policymakers at the NDTV World Summit and market veterans at NDTV Profit Ignite: Diwali Edition offered the same advice: stay invested and filter out the noise.
-
The Curious Case of Equitas Small Finance Bank And A CEO Who Quit For Stock
PN Vasudevan believes persistent investor concerns over a perceived conflict of interest had become a governance overhang on Equitas Small Finance Bank's stock, even as the lender improved profitability and asset quality.
