The National Stock exchange yesterday launched derivative contracts (futures and options) on FTSE 100, the widely tracked index of the UK equity stock market. At the close of trading at 3.30 pm, the traded value of derivative contracts on FTSE 100 was nearly Rs 500 crore.
The total number of contracts that were traded in the derivative contracts of the FTSE 100 were more than 17,600.This is the first time that futures and options contracts, based on an index of the UK equity stock market, has been launched in India.
FTSE 100 includes 100 largest UK listed blue chip companies and has given returns of 17.8 per cent on investment over three years. The index constitutes 85.6 per cent of UK’s equity market cap. NSE has waived transaction fees for trading in the FTSE 100, till November 2, 2012, to encourage active participation in the contracts.
NSE has also announced a liquidity enhancement scheme, to provide incentives to clients and member brokers at the order level, trade level and open interest level. Besides incentives are also being given to encourage active participation of clients. Trading in derivatives on FTSE 100 will enable investors to take exposure to UK markets with complete ease. The contracts are rupee denominated, so an investor does not face any currency risk. They can be traded by all equity derivatives members of the NSE, through existing infrastructure, with no additional investment required.
Trading in derivative contracts of FTSE 100 on NSE has many benefits for an investor. It helps in portfolio diversification, which yields higher returns and poses a lower risk, than any individual investment found within the portfolio. These contracts can be used to hedge overseas portfolios and to take positions based on expected news flow from the UK markets.( there is a three hour timing overlap between the Indian and UK markets).