The National Stock Exchange (NSE) through its GIFT City arm in the International Financial Services Centre (IFSC) in Gujarat, has brought in new facilities that will enable investors to buy and sell US Stocks. The NSE International Exchange, which is a wholly-owned subsidiary of the NSE of India announced that US Stocks would be available for trade. This means that Indian investors can now buy and sell stocks in companies like Apple, Google, Microsoft and other prominently listed US entities. The offerings will be in the form of unsponsored depository receipts.
Similarly, the IFSCA has also facilitated the same under the Regulatory Sandbox. With this new change, the entire transactional process of the aforementioned US stocks will come under the authority of the IFSC body. This includes oversight of trading, clearing, settlement and even holding of US stocks. This move is a first of its kind in India, which has been attempted by the Liberalized Remittance Scheme limits prescribed by the Reserve Bank of India. It will enable investors, particularly from the retail segment to transact via the NSE IFSC platform.
The advantage here is that thanks to the business model under the NSE IFSC that is going to be implemented, it gives Indian investors two new opportunities. One is that these investors get to make additional investments, and the other is that the business model and platform make the process of investment a low-cost one.
The arrangement will now allow investors to hold fractional ownership of US stocks. Having said that, these investors would be able to hold their depository receipts in their own Demat accounts opened in GIFT City and will be entitled to receive corporate action benefits pertaining to the underlying stock, according to a press release.
Tapan Ray, MD and Group CEO of GIFT City said, “GIFT City is emerging as a financial gateway of a country for investment in India and globally. The ecosystem of international banks, international exchanges and capital market intermediaries have been growing rapidly at GIFT City. It is the right time to get such an innovative product especially from an Indian perspective; we have seen over a period that Indians have started investing in global stocks. We congratulate NSE IFSC for this new endeavour and wish them a great success."
Investors will also be provided with an option to trade in said fractional quantity when compared to the underlying shares traded in the US market. This approach will supposedly be a crucial part of the affordability of the process.
The NSE IFSC Clearing Corporation Limited (NICCL) will be offering its investors robust risk management frameworks and it will allegedly help in facilitating the clearing and settlement of all trades in depository receipts. It will also provide settlement guarantees to all the trades that are done via the platform. The investors have an added layer of protection in this process as they are covered under the investor protection framework of the NSE IFSC.
Before all these changes, Indian investors looking to buy US stocks did so via specific online brokers who had authorization from both Indian and US regulators. These brokers allow ownership of up to one millionth of a US stock. The concept of fractional ownership had been popular even before this new scheme.
Vikram Limaye, MD and CEO of NSE said, “This will be an innovative product, and one of the key milestones for NSE IFSC that will expand the product coverage of the Exchange beyond existing clientele. The product enables resident individuals to easily and cost effectively invest in US stocks under the LRS framework of RBI (which permits the resident individuals to remit up to USD 2,50,000 per financial year for any permitted current or capital account transaction). With the guidance of IFSC authority and the support of all the key stakeholders involved, we hope to operationalize this product soon.”
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