SynopsisBSE said on Tuesday its IFSC unit will be coming up with an exclusive platform for foreign securities akin to NSE. However, unlike NSE, BSE will be offering stocks beyond US markets and would include securities from US, Canada, Europe, and Australia.
Mumbai: Investing in foreign securities is set to become cheaper and more secure for Indians. The National Stock Exchange (NSE) and BSE are creating special platforms at the International Financial Services Centre (IFSC) in GIFT City through which Indians can invest in foreign shares.
“The product enables resident individuals to easily and cost effectively invest in US stocks under the LRS (Liberal Remittance Scheme) framework of RBI,” said NSE chief executive officer Vikram Limaye.
The system will allow Indians to hold the securities through depository receipts—an instrument that represents a foreign company’s publicly traded securities–in their own demat accounts at the financial centre. While the trades on NSE’s platform will be guaranteed by the exchange, the absence of taxes on these transactions will be the biggest draw for local investors to trade through IFSC. Not having to use a US broker for executing trades will also help investors save on commissions. Experts said the cost of trading through the IFSC could be 60-70% lower. IFSC is a tax-exempt jurisdiction, hence levies such as capital gains tax and stamp duty won’t apply. Gujarat International Finance Tec-City, or GIFT City, is located near Ahmedabad.
Currently, numerous domestic brokerages allow Indians to buy foreign shares. Typically, the Indian broker has a tie-up with a US-based brokerage.
BSE to offer stocks beyond US markets
It buys the shares on behalf of the Indian brokerage’s clients and holds them in its own account. The US brokerage charges $2-3 as fees per transaction.
“NSE’s platform is expected to be created in the next few months,” said a senior executive with direct knowledge of the matter. “The exchange is also in talks with some of the biggest institutional brokerages of the world to act as market makers and issue depository receipts.”
BSE said on Tuesday its IFSC unit will be coming up with an exclusive platform for foreign securities akin to NSE. However, unlike NSE, BSE will be offering stocks beyond US markets and would include securities from US, Canada, Europe, and Australia.
“The addition of global stocks is a significant step that will bring further investment into the region from investors seeking contracts with a strong emphasis on liquidity and investability,” said Ashishkumar Chauhan, chief executive officer, BSE.
The development comes at a time when interest in foreign equities has seen a sharp surge among Indians. For instance, Indians have sought to invest in recent listings such as Robinhood, Coinbase and Doordash, ET reported on August 9.
“Initially, top 50 US stocks by market capitalisation will be available for trading but eventually the plan is to offer securities of top 200-300 companies,” said the executive cited above.
All trades in these depository receipts at IFSC will be settlement guaranteed by NSE just like domestic shares. In other words, if there is fraud or misappropriation, it will be the responsibility of NSE to make good the trade.
Investors will be entitled to dividends and participation in bonus issues and voting rights. Shares bought through most avenues now available don’t provide this entitlement.
NSE wants to design the platform in a way that will allow investors with a ticket size of as low as $2-3 (Rs150-225). Buying a whole share may be difficult for most Indians given high prices. For instance, a single share of Amazon costs $3,341, or Rs 2.5 lakh. Fractional ownership–shares divided up by market makers to lower the minimum ticket size–is a popular product in the US. Some international brokerages do offer this facility to Indians.
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