REFILE-UPDATE 1-India's GIFT Nifty derivative rules diverge from mainland curbs

(Corrects to add missing word to headline) By Jayshree P Upadhyay MUMBAI, Sept 30 (Reuters) – India's National Stock Exchange will offer a daily expiry on GIFT Nifty contracts to foreign investors via a tax-neutral jurisdiction as it seeks to attract more global funds, diverging from domestic markets' tighter equity derivatives rules. GIFT Nifty is a dollar-denominated derivative contract of the Nifty 50 traded on NSE subsidiary, the NSE International Exchange (NSE IX) in Gujarat International Finance Tech (GIFT) City. In August, the contract crossed $100 billion in terms of monthly turnover. Zero-day-to-expiry contracts will be introduced with effect from October 13, the NSE said in a notice late on Monday. There will be five weekly expiries from Monday to Friday, expiring on a daily basis, NSE said. Resident Indians are not allowed to trade in these contracts. India has been pitching the tax-neutral financial centre in Indian Prime Minister Narendra Modi's home state of Gujarat as an alternative to centres such as Dubai and Singapore by offering lenient regulations and taxation policies to attract foreign investors. "We are hoping to attract more foreign investors by offering a product that is available on other global exchanges such as the Chicago Board Options Exchange," said V. Balasubramaniam, chief executive of NSE IX. CONTRASTING CONCERNS The introduction of daily expiries on GIFT Nifty is in contrast to steps being taken to cool the booming equity derivatives trade in the mainland markets, where domestic retail investors have rushed in. Nearly 90% of retail investors are incurring losses in derivative trading, market regulator Securities and Exchange Board of India (SEBI) has said. In October last year, SEBI limited expiries to one per week for each exchange. It is now planning to increase the tenure of equity derivatives contracts. With mainland markets, the regulator's concern is to limit retail investor losses, said a person with direct knowledge of the GIFT authorities' decision. A similar concern does not exist in GIFT City as the product is meant only for sophisticated foreign institutions and proprietary traders, they added. Exchanges in GIFT City are regulated by International Financial Services Centres Authority. (Reporting by Jayshree P. Upadhyay; Editing by Eileen Soreng and Janane Venkatraman)

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