The Bombay Stock Exchange (BSE) is considering launching derivatives of the BSE-100 index on the Hong Kong Stock Exchange. The move is aimed at popularising the index among Asian traders and taking on products from rival National Stock Exchange (NSE).
“We are planning to launch (derivatives on) BSE-100 index in Hong Kong soon. Talks are underway and traders in Hong Kong would be able to trade in derivative contracts of the BSE-100,” said Anil Shah, trading member-director, BSE. “This will increase BSE’s brand visibility and provide convenience to foreign investors to trade in derivatives in India’s top listed companies,” he added.
“There are many plans in the pipeline for BSE’s derivatives business. Listing derivative contracts of the BSE-100 in Hong Kong is one of these. Currently, things are at a preliminary stage. It would take some time for these to be finalised,” said another BSE official.
So far, derivative contracts of the Nifty and the Sensex are available for trading abroad. While Sensex futures are traded on the Eurex in Frankfurt, Nifty derivatives are listed on the Singapore Stock Exchange.
“We hold nearly 25 per cent market share in India’s Rs 1.35-lakh-crore derivatives trading market. We expect this to swell to 50 per cent over the next six months,” said Shah.
For the BSE, the move is significant, especially when the exchange is trying to increase its presence in the derivatives segment. Currently, there is no participation of foreign institutional investors in derivatives trading on the BSE platform.
On an average, equity derivatives contracts worth Rs 25,000-50,000 crore are traded on the BSE. On Tuesday, the futures and options turnover at the BSE stood at Rs 36,716 crore, with 90,363 trades.
Recently, BSE had launched derivatives on the BSE-100 index, which market players say is pitched against the Nifty. The cost of trading in BSE-100 derivatives is much lower than trading in derivatives on the Nifty. According to exchange officials, the BSE-100 has a 99.4 per cent correlation (coefficient of variation is 0.994) with the Nifty, and both indices are trading at nearly the same levels. The BSE-100 also has a 99.4 per cent correlation with the Morgan Stanley Capital International India Index, widely tracked by foreign institutional investors. While Nifty stocks represent about 65 per cent of the free-float market capitalisation on the NSE, the BSE-100 accounts for a little over 70 per cent of it on the BSE.
