Indian exchanges cut ties to foreign bourses after government nod - sources

India’s government fully endorses a dramatic move by domestic exchanges to cut off data to global bourses, sources familiar with the matter said, seeing it as vital to lure foreign investments into the country from Singapore and other financial centres.

It was only after receiving the endorsement that India’s three private stock exchanges - National Stock Exchange, BSE Ltd and MSEI Ltd - proceeded with the joint announcement on Feb. 10 to stop providing data to foreign rivals, said two senior officials at the bourses.

The sources declined to be identified because they were commenting on internal deliberations.

A senior finance ministry official said New Delhi had held “wide consultations” on whether to support the exchanges’ actions, and concluded it was needed to allow a new international finance centre being set up in India “to compete with Singapore and Dubai.”

“We have to balance the needs for domestic interests and our image in the global market,” said the official, declining to be identified as he was not authorised to talk to media.

The move by the exchanges, blasted by index provider MSCI Inc as protectionist, reflects long-held wariness by Indian officials about the trading of Indian derivative products overseas, outside the ambit of domestic regulators.

The action is also a tactical move to lure foreign investors to an international financial centre being developed in Gujarat, Prime Minister Narendra Modi’s home state.

Called Gujarat International Finance Tec-City, or GIFT City, the financial centre has failed to gain much traction since INX, a unit of the Bombay Stock Exchange, became the first exchange to set up there last year, despite offering close to zero taxes, dollar contracts, and top-notch infrastructure.