Published On: Thu, Jan 13th, 2011

Indian Exchanges Allowed Trading on Global Exchanges

After prolonged demands from Indian exchanges the Securities and Exchange Board of India has now allowed them to provide trading in derivatives contracts on 24 global exchanges including that of US, Europe and Asia global indices.

“It has been decided to permit stock exchanges to introduce derivatives contracts (future and options) on foreign stock indices in the equity derivatives segment,” the Sebi said in a circular. The index should have a market capitalisation of at least $100 billion and it should consist of at least 10 constituent stocks.

“No single constituent stock (should have) more than 25 per cent of the weight, computed in terms of free float market capitalisation, in the index,” it said.

The absolute numerical value of the underlying foreign index shall be denominated in Indian rupees (INR). The derivatives contracts on that foreign index would be denominated traded and settled in Indian rupees.

Trading member/ mutual funds position limits (higher of Rs 500 crore or 15 per cent of the total open interest in Index derivatives) as well as the disclosure requirement for clients whose position exceeds 15 per cent of the open interest of the market, as applicable to domestic index derivatives, will be applicable to derivatives on foreign indices.

The regulator further said that after introduction of derivatives on a particular stock index, if that index fails to meet the eligibility criteria for three months consecutively, no fresh contract shall be introduced on that index.

Source: Commodity Stock News

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