Last updated on November 25, 2023
NSE IFSC Limited, also known as NSE International Exchange, is a wholly-owned subsidiary of the National Stock Exchange (NSE) of India. It was incorporated on 29th November 2016 and received approval from the capital market regulator, the Securities and Exchange Board of India (SEBI), to establish an international exchange in Gujarat International Finance Tech City (GIFT) – International Financial Service Centre (IFSC) Gandhinagar.
The primary objective behind the establishment of IFSC was to expand the financial market and attract capital into India. In the GIFT IFSC, stock exchanges are permitted to trade securities in any currency other than the Indian Rupee. The primary focus of these exchanges is to facilitate international investors who wish to trade Indian securities.
Notably, all trading and settlement activities on the NSE IFSC platform occur in US dollars, which helps mitigate the impact of currency fluctuations. This feature is advantageous for international investors as it provides a stable and predictable trading environment for trading Indian stocks.
NSE IFSC: GIFT City
GIFT City, located in the state of Gujarat, is a special economic zone that houses NSE IFSC. In this financial hub, stock exchanges are permitted to trade securities in any currency other than the Indian Rupee. It allows trading in various financial instruments, including equity shares of foreign companies, depository receipts, debt securities, currency, index, interest rate, non-agriculture commodity derivatives, and exchange-traded products from FATF/Noncompliant jurisdictions, subject to SEBI approval. The International Financial Services Centres Authority (IFSCA) regulates GIFT City.
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Can Indian Retail Investors Trade in GIFT City?
Yes, Indian retail investors are allowed to invest and trade in financial instruments at GIFT City. However, there are certain conditions and regulations that they need to adhere to. To invest in GIFT City, the individual must be a resident of India as per the Foreign Exchange Management Act (FEMA). When an Indian investor transfers funds to GIFT City, it is considered a money transfer out of India through the Liberalized Remittance Scheme (LRS). Under LRS, a maximum of USD 250,000 per year can be invested through this route.
It is essential to note that funds transferred via LRS cannot be used to trade margined products or derivatives in GIFT City. Additionally, retail investors need to have a Demat account with a broker registered with NSE International Exchange to participate in trading activities within GIFT City. By following these guidelines, Indian retail investors can take advantage of the opportunities available at GIFT City within the regulatory framework.
NSE IFSC: Investing in US Stocks from India
Investors can take advantage of various investment opportunities at NSE IFSC, including trading in equity, currency, and commodity derivatives. However, the main attraction of the NSE International Exchange lies in the ability of investors to invest in US stocks.
The exchange permits investment in 50 well-known US stocks, such as Amazon, Apple, Microsoft, Alphabet (Google), Netflix, Meta (Facebook), Walmart, Tesla, and other prominent publicly traded US companies. It is important to note that these stocks are not listed in India; instead, they are offered in the form of unsponsored depository receipts.
Unsponsored depository receipts function by market makers purchasing shares in the United States and issuing receipts based on these holdings. As these are unsponsored receipts, there is no involvement or consent from the respective companies whose stocks form the foundation of these transactions.
These receipts, known as NSE IFSC receipts, enable investors to engage in trading activities through NSE IFSC’s registered brokers. In essence, these receipts provide the holders with a proportionate beneficial interest in the underlying shares of the respective US companies.
NSE International Exchange: How to Trade in US Stocks?
Trading US stocks through NSE IFSC is relatively straightforward. To illustrate, let’s consider an example of buying one share of Amazon for USD 92 in the US exchanges, one needs to have approximately INR 7,400. In IFSC, one share of Amazon is represented by 10 IFSC receipts. This allows investors to invest a fraction of the amount required for a full share, making it more affordable.
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What are 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 we explore NSE IFSC trading in US stocks, let’s understand the role of NSE IFSC registered brokers. Several well-known brokers, including Anand Rathi, Emkay, HDFC, Motilal Oswal, and SMC Global, are registered with NSE IFSC. However, some popular brokers like Zerodha and Upstox are yet to be registered with the international exchange.
|Member Name||Membership Category*|
|ANAND RATHI INTERNATIONAL VENTURES (IFSC)|
|APPRECIATE BROKING IFSC PRIVATE LIMITED||TM|
|ARIHANT CAPITAL (IFSC) LIMITED||TM|
|ARYA FIN-TRADE (IFSC) PRIVATE LIMITED||TM-SCM|
|DAGA BUSINESS (INTERNATIONAL) STOCK|
BROKERS (IFSC) PRIVATE LIMITED
|DIVYA PORTFOLIO (IFSC) PRIVATE LIMITED||TM|
|DOLAT CAPITAL IFSC PRIVATE LIMITED||TM|
|EAST INDIA IFSC PRIVATE LIMITED||TM-CM|
|EMKAYGLOBAL FINANCIAL SERVICES IFSC|
|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|
|HDFC BANK LIMITED- IFSC BANKING UNIT (IBU)||TM-CM|
|INDO THAI GLOBE FIN (IFSC) LIMITED||TM|
|JAINAM IFSC MAVENS PRIVATE LIMITED||TM|
|KOTAK MAHINDRA BANK (IBU)||PCM|
|MANSUKH IFSC BROKING PRIVATE LIMITED||TM-SCM|
|MARWADI INTERNATIONAL SECURITIES (IFSC)|
|MOTILAL OSWAL FINSEC IFSC LIMITED||TM|
|NUVAMA CAPITAL SERVICES (IFSC) LIMITED||TM-CM|
|OPEN FUTURES AND COMMODITIES IFSC|
|PACE FINANCIAL (IFSC) PRIVATE LIMITED||TM-SCM|
|PHILLIP VENTURES IFSC PRIVATE LIMITED||TM-SCM|
|PLUSTRADE HOLDING (IFSC) PRIVATE LIMITED||TM|
|RAGHUNANDAN CAPITAL (IFSC) PRIVATE|
|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|
|SMC GLOBAL IFSC PRIVATE LIMITED||TM-CM|
|STAR FINVEST (IFSC) PRIVATE LIMITED||TM|
|STOCKHOLDING CORPORATION OF INDIA|
|STOCKHOLDING SECURITIES IFSC LIMITED||TM-CM|
|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 membership category allows a member to execute trades on his own account as well as on behalf of his clients; however, clearing and settlement of trades executed through the Trading Member must be done through a Trading-cum Clearing Member or Professional Clearing Member of the NSE IFSC Exchange.|
|Trading Cum Self Clearing Member||This membership category entitles a member to execute trades and to clear and settle the trades executed on his own account as well as on his clients.|
|Trading Cum Clearing Member||This membership entitles a member to execute trades on his own behalf as well as on behalf of his clients, as well as to clear and settle trades executed by themselves and other trading members who choose to use the member’s clearing services.|
|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.|
NSE International Exchange: Membership Process
- Incorporate a company in GIFT SEZ
- Submit an application to GIFT SEZ-IFSC & obtain approval from the Development Commissioner
- Submission of application to NSE IFSC / NSE IFSC CC
- Grant of NSE IFSC Exchange/CC offer letter subject to SEBI Approval
- Onward submission by NSE IFSC to SEBI for registration
- Grant of SEBI Approval
- Forward the SEBI certificate to the member
- Submit enablement documents
- Member enabled on the Trading system
This was all about investing in US stocks from India through NSE’s global platform. Happy Investing!
NSE IFSC offers a unique opportunity for Indian investors to trade in US stocks with fractional ownership, making it more accessible and affordable. As a special economic zone with regulatory oversight by IFSCA, GIFT City provides a conducive environment for international financial activities. Retail investors can benefit from this platform to diversify their investment portfolio and gain exposure to global markets.
For those looking to explore new avenues of investment beyond the domestic market, NSE IFSC presents an attractive option to participate in the growth of leading US companies while reducing the impact of currency fluctuations.
Can Indian retail investors trade in US stocks at NSE IFSC?
Yes, resident Indians can invest and trade in US stocks at NSE IFSC. However, they must comply with FEMA regulations and can invest up to USD 250,000 per year via LRS.
What is the significance of NSE IFSC receipts?
NSE IFSC receipts represent unsponsored depository receipts that allow investors to trade US stocks with fractional ownership, making it more affordable.
Which brokers are registered with NSE IFSC?
Some well-known brokers registered with NSE IFSC include Anand Rathi, Emkay, HDFC, Motilal Oswal, and SMC Global.
What is the role of market makers in NSE IFSC?
Market makers provide liquidity and two-way quotes for trading US stocks on NSE IFSC’s platform, ensuring efficient transactions with low impact costs.