London-headquartered high-frequency trader Qube Research & Technologies (QRT) has become the first global high-frequency trading firm to establish operations in GIFT City, providing a significant boost to India's only International Financial Services Centre. According to reports from Business Standard, the British fund has received in-principle approval from the IFSC Authority (IFSCA) to register as a fund management entity, marking a historic milestone for the special economic zone. While QRT confirmed it is establishing an office in GIFT City alongside its Mumbai operations, the company did not provide further details about the setup.
By registering in the international zone of GIFT-IFSC, QRT will be able to enjoy complete tax exemption on derivative gains and benefits on securities transaction tax, as reported by Business Standard. The fund is expected to launch a Category III fund, which allows undertaking sophisticated trading strategies. While some HFTs have previously set up offices in GIFT City, they operate from the domestic tariff area (DTA) and benefit from stamp duty refunds on share-broking transactions. According to Rajesh Gandhi, partner at Deloitte India, HFTs in the DTA register as stockbrokers and invest through their proprietary books, whereas a GIFT City setup offers complete tax exemption on derivative gains.
As reported by Business Standard, several prominent HFT players already operate from GIFT City, including Jump Trading, Tower Research Capital, Graviton Research Capital, NK Securities, Mathysis, Quadeye, and Pluswealth, which operate from the domestic tariff area segment. Sanjay Kaul, managing director and group chief executive officer of GIFT City, noted that the IFSC has emerged as a hub for HFT and proprietary trading activity. The IFSC offers tax exemptions on certain income attributable to non-resident investors, including capital market transactions, coupled with foreign currency operations and a globally aligned regulatory regime.
According to Kunal Sharma, managing partner at TARAksh Lawyers and Consultants, setting up in GIFT-IFSC provides greater regulatory predictability amid growing scrutiny of offshore investment structures. Section 10(4D) of the Income-Tax Act provides exemptions for specified income earned by eligible Category III AIFs located in IFSCs and receiving income solely in convertible foreign exchange. Rohit Jain, managing partner at Singhania & Co, emphasized that GIFT-IFSC offers offshore-style tax treatment, enabling Category III AIFs to deploy leveraged, derivatives-led strategies with operational flexibility. The tax benefits available to specified funds in GIFT-IFSC are explicitly codified in domestic law, making them inherently more certain from a tax perspective.
High-frequency trading firms have gained momentum in India in recent years due to high liquidity and trading opportunities, as reported by Business Standard. However, some firms have faced regulatory scrutiny over alleged market manipulation through trading strategies. Legal experts noted that the Tiger Global tax controversy has heightened sensitivity among offshore funds regarding issues such as permanent establishment exposure and retrospective characterisation disputes. The GIFT-IFSC setup offers better protection, albeit with requirements to maintain adequate substance and key managerial personnel based in GIFT City, with certain key officials required to be based in GIFT-IFSC under usual AIF norms.
