The National Stock Exchange (NSE) is set to launch futures contracts in the S&P 500 Index on its platform, which will enable Indian investors to take exposure to the most-actively traded futures contract in the world.
S&P is helping the country's largest bourse to market the S&P 500, which is expected to start trading on the NSE soon.
The Chicago Mercantile Exchange (CME), which owns the rights to S&P and Dow Jones Industrial Average, has given the licence to NSE to start trading in futures contracts on the index.
According to NSE officials, CME will launch futures trading in the Nifty 50, the benchmark index of Indian bourse, from July 19.
NSE has tied-up with S&P to help NSE create awareness about the index, especially because the target audience is different, said an exchange official.
"To attract the large retail investor population in India (60-65 per cent of NSE investors are retail investors), the exchange will be designing special contracts, which are smaller in size," said an NSE official.
This will be the first time that a global index like S&P 500 will be trading anywhere outside the US.
"Since futures contracts are traded for 23 and a half hours on CME globex, the fact that S&P 500 will be trading here in a different time zone, will not be a problem.
"The price discovery will be continuing for those entire 23 and a half hours," said another official involved in the process.
When asked about the possible timeframe for the launch of S&P 500 futures in India, the NSE spokesperson told PTI that the exchange is awaiting regulatory approval and is hopeful to start the same soon.
Domestic brokerages and investors are keenly awaiting the launch, analysts said.
"The platform will be a good thing for Indian investors and the response to it would be enthusiastic," Unicon Financial CEO Gajendra Nagpal said.
In March this year, NSE and CME entered into an agreement for cross listing of the benchmark indices.
A futures contract is an agreement that allows an investor to bet on the underlying asset—an index or stock—-for a pre-determined price and period.
Today, NSE is the largest exchange in India in the cash and equity derivatives. It is also the fourth largest in the world in terms of trading volume in the cash market.
NSE features among the top 10 derivative exchanges in the world in terms of the number of contracts traded and cleared in equity derivatives. In Asia, only the Korean exchange is ranked higher.
