Insight 14 July 2020

Sebi eases ownership rules for Gift City Exchanges

Market regulator the Securities and Exchange Board of India(Sebi) has eased the ownership norms for stock exchanges operating from International Financial Services Centre(IFSC), GIFT City.

Until now, only a select few category of investors such as Indian banks, insurance companies and public institutions were allowed to hold shares of stock exchanges based in IFSC, Gift City. However, going forward all categories of investors can hold equity in such exchanges. Market participants say the circular will open up the GIFT City exchanges for several new categories of investors including foreign portfolio investors (FPIs), Alternative Investment Funds(AIFs) and even wealthy individuals who fulfil the regulatory requirements. However, such investments are subject to a maximum cap of 5% for each investor.

The development comes as a part of the government’s efforts to develop IFSC, Gift into an international financial hub. Market participants say, Sebi's announcement will bring the stock exchanges based out of IFSC on par with the on-shore exchanges like BSE or NSE in terms of ownership norms.

“We welcome the broad basing of eligible investors in the IFSC Exchanges as the SEBi Circular allows any person Indian or Foreign to hold upto 5 per cent on the IFSC Exchange,” said V Balasubramaniam, chief executive officer, India INX – a subsidiary of BSE. “This will allow more investors from India and Abroad to take a stake in our exchange and also allow private equity and investment funds to be part of our stakeholder ecosystem.”

Market participants say the announcement to allow more sections of investors could also encourage some of the big foreign exchanges to set up their subsidiaries at IFSC. Investors based out of IFSC Gift City currently avail a lot of tax rebates including exemption on capital gains tax, Securities Transaction Tax(STT) and stamp duty.

The announcement will increase confidence with large groups of investors and will re-emphasize the importance of Gift-IFSC as an emerging Global Financial Services Hub”

Khushboo Chopra Head of Business Development - India

The exchange currently offers various derivative products including equity derivatives of Indian stocks and select few foreign stocks. Debt instruments such as masala bonds are permitted as well.

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