NSE to win India derivatives war, the only way is to lose to SGX

By | May 26, 2018

Is the Nifty 50 a work of art – like Star Wars?

Over the coming weeks, the National Stock Exchange of India Ltd. will assert an intellectual property right over its popular equity benchmark. It’s seeking an injunction against Singapore Exchange Ltd., which wants to start its own derivative based on publicly available settlement prices of Nifty futures contracts.

Such lawsuits are nothing new in the world of index providers and exchanges.

In 2006, the New York Mercantile Exchange failed to persuade both a U.S. District Court and the Second Circuit Court that Intercontinental Exchange Inc. was violating the copyright of Nymex settlement prices by using them in its over-the-counter derivative contracts. The judges ruled that settlement price wasn’t one expression of an idea where others were possible. Rather, it was the only way to express Nymex crude’s closing price. Giving Nymex a copyright would amount to giving it intellectual  ownership of… prices. And that would be ridiculous.

MSCI Inc. lashed out against the move, saying it could threaten India’s emerging-market classification. SGX, meanwhile, found a clever workaround to protect its own revenue. Its new contracts would merely take published settlement prices of NSE’s contracts on the last Thursday of every month and be called SGX India futures. All investors will know that what they’re really dealing in is the Nifty 50, except NSE won’t get any license fee.



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