GIFT City bourses to offer oil contracts:

GIFT City bourses to offer oil contracts:

Context

• The Securities and Exchange Board of India (SEBI) has allowed exchanges established in GIFT City to introduce crude oil futures contracts, trading in which is set to commence later this month.

What is the GIFT City?

• GIFT is conceptualized as a global financial and IT services hub, a first of its kind in India, designed to be at or above par with globally benchmarked financial centers such as Shinjuku, Tokyo, Lujiazui, Shanghai, La Defense, Paris, London Dockyards
• GIFT is planned as a financial Central Business District (CBD) between Ahmedabad and Gandhinagar as a Greenfield development.
• GIFT is designed as a hub for the global financial services sector. More particularly, state-of-the-art connectivity, infrastructure and transportation access have been integrated into the design of the city.

What are the various objectives through which GIFT can be accomplished?

• To develop a new format for globally benchmarked Integrated City
• To propose a road map for fast track development and implementation
• To make the city scalable in each & every aspect for a distant future
• To derive the city format from fast changing lifestyles & new technologies
• To achieve an image of Global city, that keeps pace with modern technologies

What is IFSC?

• International Financial Services Centre caters to customers outside the jurisdiction of domestic economy, dealing with flows of finance, financial products and services across borders
• London, New York and Singapore can be counted as global financial centres.

What are the services an IFSC can provide?

• Fund-raising services for individuals, corporations and governments
• Asset management and global portfolio diversification undertaken by pension funds, insurance companies and mutual funds
• Wealth management   
• Global tax management and cross-border tax liability optimization, which provides a business opportunity for financial intermediaries, accountants and law firms.
• Global and regional corporate treasury management operations that involve fund-raising, liquidity investment and management and asset-liability matching
• Risk management operations such as insurance and reinsurance
• Merger and acquisition activities among trans-national corporations

What is the significance of the incursion of crude oil in IFSC?

• There is a high demand for crude oil contracts globally and the launch of such contracts in GIFT City will boost the liquidity
• Crude oil is the highest traded commodity on Multi Commodity Exchange of India (MCX)which is the country’s largest commodity bourse in terms of market share.
• The inclusion of crude oil contracts at the International Financial Services Centre (IFSC) was one of the main demands by market participants to trade in the global commodity in dollar terms, with the added advantage of lower trading costs and also longer trading hours on Indian shores.
• BSE’s India INX and the NSE IFSC are the two operational bourses in the special financial zone in Gujarat.
• India INX would offer two contracts — one with Brent crude as the underlying, and the other with WTI crude.