It has been just over a week since the Chicago Mercantile Exchange (CME) introduced trading in two futures contracts based on the National Stock Exchange’s Nifty benchmark. The volume in one of these is already impressive.
E-micro Nifty futures, with a notional value similar to that of the contracts on the Singapore Stock Exchange (SGX), have registered a daily volume of more than 2,000 contracts on a couple of occasions. The combined turnover of the two contracts has been more than Rs 100 crore on most days.
According to people tracking the development, the investor interest in E-micro Nifty contracts can be attributed to the fact that CME contracts can be used to offset positions on SGX. An investor can initiate a position on CME or SGX and offset it at the other exchange.
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No of contracts
According to data from Bloomberg, E-micro Nifty contracts, with a current value of approximately $10,900 each, are seeing an average volume of nearly 1,700 contracts since debut on July 19. A spurt in the volume was visible on July 22 when 2,226 were traded. It was followed by 2,807 contracts on July 23. This is approximately 15 per cent of the Nifty volume on SGX. According to CME, the contract size of E-micro Nifty contracts is $2 multiplied by the value of the Nifty on that day.
"The volumes are pretty good in E-micro, as the contract size is the same as that available on the Singapore Stock Exchange. And, there is a mutual offset facility available to brokers who trade on CME and SGX," said an NSE official. Market experts also say investors can use the E-micro Nifty contracts to play the arbitrage game between continents. The contracts enjoy a Mutual Offset System due to an arrangement between CME Group and SGX. "This facility allows traders to take positions in eligible index contracts at one exchange and offset them at the other one — essentially creating one marketplace crossing different time zones,” says a CME release.
Meanwhile, the E-mini Nifty contracts, with a current value of approximately $54,510, have seen a drop in volume in the past couple of trading sessions. On July 23, these registered their highest volume of 163 contracts. On Monday, however, only 78 were traded. The contract size of E-mini contracts is $10 multiplied by the Nifty value on that day. Although E-mini Nifty futures listed on CME are not eligible for mutual offset, they are eligible for a position offset with E-micro Nifty futures.
Both Nifty futures contracts were introduced on CME on July 19 and are traded on the CME Globex platform, which provides access to participants across the globe.