Will allow NSE to launch F&O contracts on FTSE 100
The National Stock Exchange (NSE) is likely to sign a cross-listing agreement with the London Stock Exchange (LSE) group in the next two to three months.
This would allow India’s leading stock exchange to launch futures and options contracts on the FTSE 100 (an index of 100 most capitalised UK companies listed on LSE) and LSE to launch options contracts on the Nifty, say sources. The letter of intent was signed in July last year.
“Following the signing of the letter of intent, discussions with NSE are progressing well, and we look forward to making further announcements on our co-operation at an appropriate time,” the LSE group’s spokesperson said in an e-mail reply. The NSE spokesperson declined comment.
The proposed cross-listing agreement is not going to be an exclusive arrangement. The FTSE group, jointly owned by the FT group and LSE, already has an agreement with the MCX Stock Exchange (MCX-SX) to create new domestic index products for India, as well as bring a set of international FTSE indices, including FTSE 100, to MCX-SX.
MCX-SX is in the midst of a legal tussle with the stock market regulator, the Securities and Exchange Board of India (Sebi), for getting approval for new segments, including equity and equity derivatives.
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NSE has an exclusive cross-listing arrangement with the CME group, which allows it to launch rupee-denominated futures contracts on the S&P 500 and the Dow Jones Industrial Average in India.
Last month, Sebi issued guidelines for introducing derivatives contracts on foreign indices, paving the way for Indian stock exchanges to launch trading in leading global indices. It laid down two broad criteria. Foreign indices fulfiling any of the two would be allowed to trade in India. Either the index should feature among the top 15 index derivatives globally, apart from being traded on some of the leading stock exchanges, or it should be broad-based, with a market capitalisation (m-cap) of at least $100 billion.
Derivatives contracts based on global indices launched in India would be denominated and settled in Indian rupee, with trading restricted to Indian residents. The position limits will be applicable to such products in a manner similar to domestic stock index derivatives.
Indian stock exchanges will have to make available any material on price-sensitive information and those on regulatory and corporate action relating to constituent stocks of the foreign stock index to Indian investors.