Nifty futures see higher open interest in Singapore Exchange

Written by fe Bureau | Mumbai | Updated: Oct 28 2014, 07:09am hrs
Nifty futures continue to see more open interest on the Singapore Exchange (SGX) than on NSE. For five months in a row, the average daily open interest for Nifty futures on SGX has been more than double than the average daily open interest seen for the instrument on NSE. The average daily open interest for the month of October has been at 6.57 lakh contracts on SGX against 2.11 lakh contracts on NSE.

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According to experts, SGX sees higher open interest as the exchange provides hedging opportunity for traders and transaction costs are lower. SGX Nifty futures trade from 6:00-23:30 IST. This provides hedging opportunities for market makers on Indian equity-linked products even after NSE has closed. In fact, more than 15% of SGX Nifty volumes are recorded after India trading hours. As cross-exchange arbitrageurs are fairly active during the trading day, these two instruments are strongly co-related. Secondly, transaction costs for futures on NSE are ~5X greater than those on SGX. Finally, the SGX Nifty instrument is US dollar-denominated and mitigates currency risk and hedging costs, Kotak Institutional Equities said in a recent report.