NSE IFSC Trading In US Stocks: All You Need To Know

NSE IFSC Limited, widely known as the NSE International Exchange, is a wholly-owned subsidiary of the National Stock Exchange (NSE) of India. Established on 29 November 2016, it was launched after receiving authorization from the Securities and Exchange Board of India (SEBI) to create an international exchange within Gujarat International Finance Tec-City (GIFT City) in Gandhinagar.

The primary goal of NSE IFSC is to expand financial markets and attract foreign capital into India. Under the GIFT IFSC framework, exchanges can conduct transactions in foreign currencies beyond the Indian Rupee, facilitating international investment in Indian securities.

Substantially, all trading and settlement activities on the NSE IFSC platform are conducted in US dollars, minimizing currency fluctuations. This creates a stable, predictable environment that benefits international investors trading in Indian stocks.

NSE IFSC: GIFT City 

GIFT City, located in Gujarat, is a special economic zone that hosts the NSE IFSC. In this financial hub, stock exchanges can trade securities in currencies other than the Indian Rupee. It facilitates trading in various financial instruments, including foreign equity shares, depository receipts, and derivatives, subject to SEBI approval.

Direct listings of stocks at GIFT City have started, enhancing access to global capital for Indian companies. In addition to these developments, the government is positioning GIFT City as a hub for carbon credit trading, aiming to integrate sustainability into its financial framework.

Additionally, the finance ministry has lowered the mandatory public offering requirement from 25% to 10%, making it easier for companies to list internationally and attract foreign investment. The International Financial Services Centres Authority (IFSCA) regulates GIFT City, which is expanding rapidly with multiple exchanges and numerous financial entities.

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Are Indian Retail Investors Allowed to Trade in GIFT City?

Indian retail investors are permitted to invest and trade in financial instruments at GIFT City, provided they comply with specific regulations outlined by the Foreign Exchange Management Act (FEMA). To qualify for these investments, individuals must be residents of India. Under the Liberalized Remittance Scheme (LRS), they can transfer up to USD 250,000 per financial year for various investment activities, including acquiring stocks and establishing joint ventures. However, it is important to note that funds transferred through the LRS cannot be utilized for trading margined products or derivatives.

To engage in trading at GIFT City, investors are required to open a Demat account with a broker registered with the NSE International Exchange. The city offers a diverse range of financial instruments, including shares, bonds, mutual funds, and government securities, all of which are traded in foreign currencies.

In addition, recent regulatory changes by the Securities and Exchange Board of India (SEBI) have made investments more appealing. These changes include relaxing caps on fund exposure to group company stocks and lowering the minimum ticket size for bond investments. These developments, combined with tax benefits for certain investment activities, significantly enhance GIFT City’s attractiveness as a global financial hub. They provide Indian retail investors with greater access to a variety of investment opportunities.

Accessing US Stock Markets: Opportunities for Indian Investors

Investors can leverage a variety of investment opportunities at the NSE International Financial Services Centre (NSE IFSC), including trading in equity, currency, and commodity derivatives. However, the primary attraction of the NSE IFSC is its provision for investors to trade in U.S. stocks. The exchange allows investment in 50 prominent U.S. companies such as Amazon, Apple, Microsoft, Alphabet (Google), Netflix, Meta (Facebook), Walmart, and Tesla. Notably, these stocks are not listed in India; instead, they are available through unsponsored depository receipts.

Unsponsored depository receipts are operated by market makers acquiring shares in the United States and issuing receipts based on these holdings. Since these are unsponsored receipts, there is no involvement or consent from the companies whose stocks are being traded. Known as NSE IFSC receipts, these instruments enable investors to engage in trading activities through registered brokers at NSE IFSC. Essentially, these receipts confer a proportionate beneficial interest in the underlying shares of the respective U.S. companies.

This structure not only simplifies access to U.S. stocks but also allows for fractional ownership, making investments more affordable for retail investors. Furthermore, all trades conducted through NSE IFSC will be governed by a robust regulatory framework ensuring transaction security and investor protection.

NSE International Exchange: How to Trade in US Stocks? 

Trading US stocks on the NSE International Financial Services Centre (NSE IFSC) is designed to be straightforward. For example, if an investor wants to buy one share of Apple Inc., currently priced at approximately USD 229.15, they would need around INR 18,700. However, through NSE IFSC, this share is represented by 10 IFSC receipts, allowing investors to purchase a fraction of a share for a significantly lower amount. This fractional ownership model makes high-value stocks like Apple more accessible and affordable for retail investors.

By utilizing these receipts, investors can trade through registered brokers at NSE IFSC without needing the full amount required for a complete share. This innovative approach not only broadens investment opportunities but also allows Indian retail investors to participate in the global stock market while adhering to the Liberalized Remittance Scheme (LRS).

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Decoding NSE IFSC Unsponsored Depository Receipts 

• Depository Receipts (DRs) are a mechanism used by companies listed in one country to attract investors and facilitate trading in another country’s exchanges. DRs can be sponsored or unsponsored depending on the involvement of the company.
• In the context of NSE IFSC, the DRs that trade on its global platform are unsponsored. This means that the depository receipts are not directly issued by the companies themselves. Instead, NSE IFSC collaborates with an international custodian (HDFC Bank IBU, in this case) to act on its behalf. The custodian holds the shares of the listed companies in the United States and then issues DRs to the depository account in India.
• Subsequently, these unsponsored DRs are listed on the NSE global platform, enabling investors to trade them. To ensure smooth and active trading, NSE IFSC has partnered with significant market makers. These market makers provide two-way quotes on the exchange, allowing for trading with low-impact costs. Market makers would need to park the shares with the international custodian before providing sell quotes. 

NSE IFSC Registered Brokers

Before delving into the specifics of trading US stocks on the NSE International Financial Services Centre (NSE IFSC), it is essential to understand the pivotal role of registered brokers within this framework. Currently, Fifty brokers are registered with NSE IFSC, providing investors access to global markets. Anand Rathi, Emkay, HDFC, Motilal Oswal, and SMC Global are popular brokers for NSE IFSC. However, notable platforms like Zerodha and Upstox have not yet secured registration with the international exchange.

NAME	CATEGORY
ANAND RATHI INTERNATIONAL VENTURES (IFSC) PRIVATE LIMITED	TM
APPRECIATE BROKING IFSC PRIVATE LIMITED	TM
ARYA FIN-TRADE IFSC PRIVATE LIMITED	TM-SCM
ASHIKA STOCK BROKING IFSC PRIVATE LIMITED	TM
BONANZA PORTFOLIO (IFSC) PRIVATE LIMITED	TM
DAGA BUSINESS (INTERNATIONAL) STOCK BROKERS (IFSC)	TM
DIVYA PORTFOLIO (IFSC) PRIVATE LIMITED	TM
DOLAT CAPITAL IFSC PRIVATE LIMITED	TM
EAST INDIA IFSC PRIVATE LIMITED	TM-CM
EMKAYGLOBAL FINANCIAL SERVICES IFSC PRIVATE LIMITED	TM
ESTEE IFSC PRIVATE LIMITED	TM
EVERMORE GLOBAL (IFSC) PRIVATE LIMITED	TM
EXCEL BROKING (IFSC) PRIVATE LIMITED	TM
FINDOC INVESTMART (IFSC) PRIVATE LIMITED	TM
GEOJIT IFSC LIMITED	TM
GLOBE CAPITAL (IFSC) LIMITED	TM-CM
GOLDMINE IFSC PRIVATE LIMITED	TM
GRD SECURITIES IFSC LIMITED	TM
GROWTH GLOBAL SECURITIES (IFSC) PRIVATE LIMITED	TM
HDFC BANK LIMITED- IFSC BANKING UNIT (IBU)	TM-CM
ICICI BANK LIMITED (IBU)	TM-CM
INDMONEY GLOBAL (IFSC) PRIVATE LIMITED	TM-SCM
INDO THAI GLOBE FIN (IFSC) LIMITED	TM
IVIK SECURITIES IFSC PRIVATE LIMITED	TM
JAINAM IFSC MAVENS PRIVATE LIMITED	TM
JUNOMONETA INTERNATIONAL IFSC PRIVATE LIMITED	TM-CM
KOTAK MAHINDRA BANK (IBU)	PCM
MANSUKH IFSC BROKING PRIVATE LIMITED	TM-SCM
MARWADI INTERNATIONAL SECURITIES (IFSC) LIMITED	TM
MOTILAL OSWAL FINSEC IFSC LIMITED	TM
NUVAMA CAPITAL SERVICES (IFSC) LIMITED	TM-CM
OPEN FUTURES AND COMMODITIES IFSC PRIVATE LIMITED	TM
PACE FINANCIAL (IFSC) PRIVATE LIMITED	TM-SCM
PHILLIP VENTURES IFSC PRIVATE LIMITED	TM-CM
PLUSTRADE HOLDING (IFSC) PRIVATE LIMITED	TM
QUADEYE IFSC PRIVATE LIMITED	TM
RAGHUNANDAN CAPITAL (IFSC) PRIVATE LIMITED	TM
RARU CAPITAL IFSC PRIVATE LIMITED	TM
RSL IFSC PRIVATE LIMITED	TM
SGX INDIA CONNECT IFSC PRIVATE LIMITED	TM-SCM
SHARE INDIA SECURITIES (IFSC) PRIVATE LIMITED	TM
SIHL GLOBAL INVESTMENTS (IFSC) PRIVATE LIMITED	TM
SILVER STREAM EQUITIES (IFSC) PRIVATE LIMITED	TM
SMC GLOBAL IFSC PRIVATE LIMITED	TM-CM
STAR FINVEST (IFSC) PRIVATE LIMITED	TM
STOCKHOLDING CORPORATION OF INDIA LIMITED (BRANCH)	PCM
STOCKHOLDING SECURITIES IFSC LIMITED	TM-CM
SUNRISE GILTS (IFSC) PRIVATE LIMITED	TM
SYNERGY DEALCOM (IFSC) PRIVATE LIMITED	TM
TRADEAIR (IFSC) PRIVATE LIMITED	TM-SCM

Key Points About NSE’s Global Exchange

• IFSC Receipts: IFSC receipts do not represent a single share of a US stock. Instead, they are issued in specific ratios or proportions of the underlying asset or stock that investors intend to buy. For instance, 50 NSE IFSC receipts may constitute one single US stock, or 100 IFSC receipts may represent half ownership of a given US stock.
• Market Timings: The market timings at NSE IFSC differ from the Indian market. Trading on the NSE IFSC begins at 8:00 PM and closes at 2:30 AM, providing investors with the opportunity to participate in the global markets during these hours.
• Price Movement: The minimum price movement for the underlying securities traded on NSE IFSC is USD 0.01. This means that the price can fluctuate from USD 1.64 to USD 1.65, USD 1.66, and so on.

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NSE IFSC: Membership Categories

NSE provides four types of membership at its international exchange. Members are chosen through a rigorous and transparent process to ensure the smooth and secure operation of the exchange systems. 

Trading Member	This category of membership entitles a member to execute trades on his account as well as on account of his clients but, clearing and settlement of trades executed through the Trading Member would have to be done through a Trading-cum Clearing Member or Professional Clearing Member of the NSE IFSC Exchange.
Trading Cum Self Clearing Member	This category of membership entitles a member to execute trades and to clear and settle the trades executed on his account as well as on the account of his clients.
Trading Cum Clearing Member	This category of membership entitles a member to clear and settle trades of such members of the NSE IFSC Exchange who choose to clear and settle their trades through this member.
Professional Clearing Member	This category of membership entitles a member to clear and settle trades of such members of NSE IFSC Exchange who choose to clear and settle their trades through this member.

Membership Process of NSE International Exchange

1. Incorporate a company in GIFT SEZ 

2. Apply GIFT SEZ-IFSC & obtain approval from the Development Commissioner 

3. Submission of application to NSE IFSC / NSE IFSC CC 

4. Grant of NSE IFSC Exchange/CC offer letter subject to SEBI Approval 

5. Onward submission by NSE IFSC to SEBI for registration 

6. Grant of SEBI Approval 

7. Forward the SEBI certificate to the member 

8. Submit enablement documents 

9. Member enabled on the Trading system 

This was all about investing in US stocks from India through NSE’s global platform.

Conclusion

The NSE International Financial Services Centre (NSE IFSC) provides a distinctive opportunity for Indian investors to engage in trading US stocks with fractional ownership, enhancing accessibility and affordability. Situated in GIFT City, a special economic zone regulated by the International Financial Services Centres Authority (IFSCA), NSE IFSC creates a favourable environment for international financial activities. This platform allows retail investors to diversify their portfolios and gain exposure to global markets.

For those seeking investment avenues beyond the domestic landscape, NSE IFSC represents an appealing option to participate in the growth of leading US companies while mitigating the effects of currency fluctuations. With the ability to invest in well-known US stocks through unsponsored depository receipts, investors can benefit from this innovative structure without the need for substantial capital outlay typically associated with direct stock purchases.