NEW DELHI: A subsidiary exchange of National Stock Exchange that operates in Gujarat International Finance Tech City (GIFT) city will make it easier for investors to buy and sell US shares from Thursday (March 3) onwards.

Initially market participants will be able to trade in eight prominent US stocks, and in a phased manner in 50 of them just like traders do in the US. Here is everything to know about the move and steps on how you can participate in trading.

Does this mean US stocks are being listed in India?
No. It is a derivative product – NSEIFSC Receipts – that the NSE IFSC exchange will be offering to Indian investors at a low cost. Now they will not need to route their investments through a broker registered in the US to buy shares of Tesla or Netflix.

Too many jargons! First and foremost, what is the NSE IFSC exchange?

It is a fully-owned subsidiary company of National Stock Exchange of India (NSE) and has received approval from the market regulator to establish an international exchange in GIFT – International Financial Service Centre (IFSC) Gandhinagar.

On the exchange, trading is permitted in equity shares of companies incorporated outside of India, depository receipts, debt securities of eligible issuers, currency, index, interest rate and non-agriculture commodity derivatives. It is the exchange that will offer trading of the derivative.

What are NSEIFSC Receipts?

In order to make US stocks accessible to Indians, market makers will buy shares in the US and issue receipts against them, which will be known as NSEIFSC Receipts. They will be equivalent to owning a stake in the company whose receipt they will be.

You can buy or sell these receipts just as you would buy or sell shares of the companies.

What are the stocks for which these receipts will be available from March 3?

From Thursday, eight stocks will be represented by their receipts. They are Amazon, Tesla, Alphabet, Meta Platforms, Microsoft, Netflix, Apple and Walmart.

The plan is to extend this list to 50 US stocks, and some of them will be Adobe, Berkshire Hathaway, Mastercard, Visa, Chevron, Morgan Stanley, Paypal and JP Morgan. For these and other remaining, the date of trading will be decided later.

So, if an investor buys one receipt of a stock, does he own a share in that company?

No. NSE IFSC said it will release the receipts in a certain ratio. For example, one share of Tesla will be equivalent to 100 NSE IFSC receipts. One share of Amazon will be equivalent to 200 IFSC receipts. That means, the value of Tesla’s receipt will be about one-hundredth of the value of Tesla shares.

Ratios for other six stocks that will be available for trading from Thursday are: Alphabet (200), Meta Flatforms (50), Microsoft (50), Netflix (50), Apple (25) and Walmart (25).

What will be the currency of trading US stock receipts?

NSEIFSC Receipts on US Stocks will be traded in US dollars. The tick size will be one cent, that is, $0.01. That means you will be able to bid for the receipts in the form of $6.62, $6.63, $6.64 and so on, but not $6.632.

How much can one invest via NSEIFSC receipts?

Indian retail investors will be able to transact on the NSE IFSC platform under the Liberalized Remittance Scheme (LRS) limits prescribed by the Reserve Bank of India (RBI). Under the LRS framework, RBI permits the resident individuals to remit up to $2,50,000 per financial year. That is about Rs 1.9 crore according to the current conversion rate.

How can one trade in these receipts?

According to Motilal Oswal, first, you will have to open trading and demat accounts with NSE IFSC registered brokers. Presently, 36 brokers are registered with the exchange. After that you need to transfer funds from your local bank account to NSE IFSC registered broker’s bank account. Once the fund reflects in your broker’s account, you are ready to trade in NSE IFSC US stocks.

What will be the trade timing?

Trading in these receipts will follow US trade timings. It will begin at 8 pm in the evening and continue till 2.30 am in the night on the next day. Thus, the trading shall be conducted over the span of two calendar days and such trading cycle shall be considered as one single business day. Time will be adjusted based on Daylight Saving changes, as applicable, the exchange said.

What are the benefits for retail investors in trading via the IFSC route compared to how it is done already?

This is a question of accessibility. Currently, the route to invest in US stocks is cumbersome and expensive. But it will be much easier.

Motilal Oswal said this presents an additional investment opportunity to the Indian investors with an easy investment process and at low cost. You will have the option to trade in fractional quantity value when compared to the underlying shares traded in US markets. Investors will be able to hold the 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.

What will be the trading holidays for these receipts?

Most trading holidays for NSEIFSC Receipts on US stocks will be as per US trading holidays. However, some Indian holidays have also been incorporated.

In 2022, the next holidays are April 15 (Good Friday), May 30 (Memorial Day), June 20 (Juneteenth National Independence Day), July 4 (US Independence Day), August 15 (Indian Independence Day), September 5 (Labor Day), October 24 (Diwali), November 24 (Thanksgiving Day) and December 26 (Christmas).


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