The National Stock Exchange 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. NSE plans to enter trading in agricultural commodities with eight new contracts that are not currently traded on any other exchanges, say reports.
The proposed new contracts for which the exchange has sought permission from the Securities and Exchange Board of India (SEBI) include almonds, castor oil, soya degum, urad dal, toor dal and pulses, the Hindu Business Line reported.
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 this year. 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.
Rival Bombay Stock Exchange (BSE), has already launched trading in agricultural commodities such as guar seed and guar gum and is reported to have already garnered more than 30% market share in guar seed.
By launching new commodity contracts, NSE hopes to derive benefits of market incentive scheme introduced by Sebi for trading in commodities not traded on other exchanges.
There is immense scope in agri-commodity trading as stock exchanges are yet to tap into the vast market, which is currently regulated by governments in most states.
Both BSE and NSE are trying to develop agri-commodity trading, as there is no transaction tax in this segment and may prove attractive for traders. 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.