Investing in foreign equities just became easier.. NSE International Exchange (NSE IFSC), a wholly-owned subsidiary of NSE announced that it will soon facilitate trading in select Wall Street stocks on its platform.
A number of retail investors have been looking for an easy way to invest in quality US stocks including Facebook, Amazon, Apple, Netflix, Alphabet, and Microsoft.
“This initiative is a first of its kind at IFSC where 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),” it said in the press release.
For trading through NSE IFSC, a prospective investor will have to open an account with a broker registered with NSE IFSC, complete the mandatory KYC process and thereafter remit funds up to $250,000 in a given financial year.
As per the press release, the offering will be in the form of unsponsored depositary receipts.
An unsponsored ADR is an American depositary receipt issued by a depositary bank without the involvement, participation, or consent of the foreign company. These securities trade on the over-the-counter market rather than on American stock exchanges.
"The business model offered by NSE IFSC will not only provide an additional investment opportunity to the Indian investors but also make the entire process of investment easy and at a low cost," added the statement.
Here's how it is going to work
Investors will be provided with an 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, India's first financial services center and will be entitled to receive corporate action benefits pertaining to the underlying stock.
NSE IFSC Clearing Corporation Limited (NICCL) will facilitate clearing and settlement of all trades in depository receipts and provide a settlement guarantee in respect to all trades executed on the NSE IFSC platform.
Furthermore, all the trades will also be covered under the investor protection framework at NSE IFSC.
However, NSE IFSC has not announced all the operational details but is aiming to launch the product at the earliest possible time. Depositories, banks and brokers have already started working with NSE IFSC to enable these investment products for Indian investors.
On the announcement, Vikram Limaye, MD & CEO, NSE said, "This will be an innovative product, and one of the key milestones for NSE IFSC that will expand the product coverage of the Exchange beyond existing clientele. With the guidance of IFSC authority and the support of all the key stakeholders involved, we hope to operationalize this product soon."