 "MCX-SX to launch F&O contracts on benchmark index")
MCX-SX said today it will launch derivatives trading on its benchmark index, SX-40, from May 15, 2013. The exchange, which commenced equity trading on February 11, 2013, has so far only allowed trading in the cash segment and stock-based derivative trading. Index-based derivatives is critical for an exchange as bulk of total volumes is generated by this segment, brokers said.
According to the announcement by the exchange, index futures on SX40 will have a tick size of Rs 0.05 and will be offered in a contract trading cycle of minimum three contracts of maturity one-month, two-months and three-months, which would be introduced simultaneously. Index options will have a tick size of Rs 0.05 and a monthly trading cycle of three serial monthly expiry contracts.
“This is a good development and a good way to stimulate volumes in the market. Today, on the NSE about 85 per cent of the total volume can be attributed to the F&O segment, which is why this product will also have good opportunity in the market,” said Sudip Bandyopadhyay, managing director & chief executive officer of Destimoney Securities.
“Initially, it would be difficult to garner huge volumes as retail and institutions would be more comfortable participating on platforms like that of NSE, which have large volumes. Even BSE is struggling to increase participation at this time,” said Dinesh Thakkar, chairman and managing director, Angel Broking. He added that MCX-SX will have to create a niche for itself through innovation to be able to generate good participation in the segment. “They will have to create different contracts and expiries to differentiate their products from that of their competition.”
Brokers and analysts say the new product would find takers only among market makers and arbitrageurs to start with. “It will be a big opportunity for index to index arbitrageurs across exchanges but the long-short traders are unlikely to rush to trade in the new product,” says Shshank Mehta, derivatives strategist, Shah Investors Home.
On the NSE, the total traded volume in the F&O segment was 23.56 lakh contracts at a value of Rs 69,157 crore as at the end of the trading session on Monday. On the BSE, it was 3.34 lakh contracts at a value of Rs 2,207.08 crore.
According to the announcement by the exchange, index futures on SX40 will have a tick size of Rs 0.05 and will be offered in a contract trading cycle of minimum three contracts of maturity one-month, two-months and three-months, which would be introduced simultaneously. Index options will have a tick size of Rs 0.05 and a monthly trading cycle of three serial monthly expiry contracts.
“This is a good development and a good way to stimulate volumes in the market. Today, on the NSE about 85 per cent of the total volume can be attributed to the F&O segment, which is why this product will also have good opportunity in the market,” said Sudip Bandyopadhyay, managing director & chief executive officer of Destimoney Securities.
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As on Monday, the total traded volume in the cash segment for the benchmark index SX-40 was 32,803 shares at a total value of Rs 2.19 crore.
“Initially, it would be difficult to garner huge volumes as retail and institutions would be more comfortable participating on platforms like that of NSE, which have large volumes. Even BSE is struggling to increase participation at this time,” said Dinesh Thakkar, chairman and managing director, Angel Broking. He added that MCX-SX will have to create a niche for itself through innovation to be able to generate good participation in the segment. “They will have to create different contracts and expiries to differentiate their products from that of their competition.”
Brokers and analysts say the new product would find takers only among market makers and arbitrageurs to start with. “It will be a big opportunity for index to index arbitrageurs across exchanges but the long-short traders are unlikely to rush to trade in the new product,” says Shshank Mehta, derivatives strategist, Shah Investors Home.
On the NSE, the total traded volume in the F&O segment was 23.56 lakh contracts at a value of Rs 69,157 crore as at the end of the trading session on Monday. On the BSE, it was 3.34 lakh contracts at a value of Rs 2,207.08 crore.