MUMBAI: Come February 22, 2008, futures contracts on the 30-share Sensex, India’s most widely tracked stock market index, will be available for trading on US Futures Exchange (USFE). The move is part of the Bombay Stock Exchange’s (BSE) efforts to facilitate participation of global investors in trading of Sensex futures, the exchange’s only product contributing some volumes to an otherwise ailing derivatives segment.
The USFE has entered into an exclusive licensing agreement with BSE to list the dollar-denominated Sensex futures on the former, which will allow US investors to directly trade in India’s equity market for the first time without requiring ADR authorisation, said the Asia’s oldest stock exchange on Monday.
The US-based Commodity Futures Trading Commission had given its approval for the sale of Sensex-based futures contracts in June last year. Subsequent to this approval, BSE’s Exchange Traded Fund on Sensex was listed on Hong Kong Stock Exchange on November 2, 2006.
In India, trading activity in Sensex futures has been negligible compared with the turnover in Nifty futures. Sensex futures saw a turnover of Rs 1,065 crore on BSE on Monday while Nifty futures attracted Rs 15,204 crore worth of business.
The USFE’s Sensex futures contract will have a notional value of 40,000 and a tick size of $5. It will trade 23 hours every trading day and the settlement will take place on monthly basis, BSE said.
“The agreement will provide an opportunity to US investors to gain exposure to India’s unprecedented economic growth, expansion and investment performance,” said USFE chairman Kevin Davis.
USFE is a Chicago-based futures and options exchange, offered derivatives products to different class of investors including retail, hedge funds and institutional investors. Though Sensex futures segment has not seen much success in the local market, brokers are hopeful that it could find acceptance overseas.
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