Global Algo Traders Set To Swarm India Stock Futures, SGX Says

Gujarat International Finance Tec-City.

(Bloomberg) -- Some of the world's largest market makers operating systematic strategies are gearing up to trade India equity futures from a new financial hub in the South Asian country, according to the president of Singapore Exchange Ltd.

About five to 10 systematic traders, who use pre-defined rules and mathematical models to make decisions, are getting ready to begin trading GIFT Nifty futures in the Gujarat International Finance Tec-City starting from the second half of 2024, Michael Syn said in an interview in Singapore.

“Once they come in, it is very clear that it's going to be quite additive because today's volume is very much on the buy-side,” he said.

The trading of the derivative contracts moved to GIFT City from Singapore last July after a dispute between SGX and National Stock Exchange of India Ltd. led to the establishment of a cross-border link. However, volumes have been subdued as India attempts to draw global traders to its new special economic zone in the western state of Gujarat.

Syn said that systematic traders have been setting up infrastructure to enable co-location with the NSE, which entails placing their servers near the exchange's. After the setup phase, they typically require six to nine months for data collection, he said, noting that the firms are nearly done putting risk controls ion place.

The notional value of the Nifty 50 Index futures has risen to $11 billion from about $9 billion at the time of migration, he said. However, SGX's results for the six months ended December showed a nearly 40% drop in volumes for Nifty 50 Index futures and options from the same period a year ago.

Participants are also permitted to trade derivative products tied to the NSE's sub-gauges for banks, information technology and financial services.

There were 22 SGX clearing members supporting the trading of Nifty derivatives via GIFT Connect as of Nov. 20, according to the SGX's website. In addition, the NSE International Exchange has 50 active members that can trade these products, according to its website.

Syn said he expects systematic traders who previously traded SGX Nifty will move to GIFT City, and also anticipates interest from the large number of traders already active on the BSE Ltd., formerly known as the Bombay Stock Exchange.

--With assistance from Ashutosh Joshi.

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