NSE in global derivatives league

Nifty futures world's seventh largest.

India has made it to the global league tables in derivatives. The National Stock Exchange has become the seventh largest exchange in terms of traded volumes in derivative contracts, according to an annual survey conducted by Calyon Financial Inc.

In 2005, of the 9,899 million derivatives contracts traded across the world, about 116 million were contributed by the NSE. The Nifty index futures was the seventh largest traded derivatives contract.

The study covers all derivatives contracts including those based on equity indices, single stocks, interest rates, currencies, agri-based commodities, metals and energy products.

The S&P CNX Nifty index futures was the largest gainer in terms of number of contracts traded. The contract volume increased by 102.85 per cent, up from 23.35 million in 2004 to 47.38 million in 2005.

The top three traded contracts in the past year were Eurodollar Futures CME (410.36 million), Euro-Bund Futures Eurex (299.29 million) and Eurodollar Options CME (188 million).

The NSE has risen to the 7th position, up from the 10th position in 2004. During the period, the contract volume rose from 67 million to 116 million, a spectacular jump of 72.5 per cent.

The top three exchanges in terms of volumes were Chicago Merchantile Exchange (883 million contracts), Eurex (784 million contracts) and Chicago Board of Trade (561 million contracts).

According to the study, what has grown is the amount of business exchanges are doing, particularly the top five exchanges due to electronic trade.

The report points out that much of industry's growth in recent years has come from the spread of futures and options trading in new parts of the globe.

Brazil, India, Mexico and China are homes to four of the world's 10 largest futures exchanges. Smaller contract sizes, the emergence of electronic trading which has reduced trading cost, and the rise in hedge fund activity in the stock options market, have been the growth engine for the derivatives market.

"Keeping score by the 'number of contracts' exaggerates India because we have an unusually small contract-size by world standards (Rs 6 lakh or so)," said an expert.

But India does not seem to be an exception. Five of the top 20 contracts offer small sizes, according to the study.