New Initiatives
Nifty futures to trade in the US
S&P CNX Nifty futures will be traded on the Chicago Mercantile Exchange (CME). CME will be introducing two new contracts E-mini and E-micro S&P CNX Nifty (Nifty 50) futures to give investors a more efficient means to gain exposure to India-related asset classes. They can also trade the contracts to hedge their risks from existing exposure to the Indian stock market. The contract size of E-mini contracts will be $10 into the value of the Nifty index on that day and the E-micro contracts will be $2 into the value of the Nifty index on NSE on that day. These contracts, which will be traded on the CME Globex platform, providing access to participants around the world, will be made available to the investors for nearly 23 hours, including the market hours in India (except the last one hour before the Indian market opens). Further, CME and SGX are extending their existing mutual offset arrangement to include the S&P CNX Nifty futures contract.
SEBI introduces pre-open call auction
The Securities and Exchange Board of India (SEBI) has decided to introduce the call auction mechanism in the pre-open session. The pre-open session shall be introduced on a pilot basis by BSE and NSE for the components of benchmark indexes BSE-30 and NSE-50.
NSE launches volatility index on real time basis
Investors would now be able to hedge their portfolios against the risk arising out of volatility in the markets, with the National Stock Exchange launching its volatility index on a real time basis. This is for the first time in the country that volatility index is being disseminated, on a real time basis. The volatility index called the 'India VIX' depicts the expected market volatility over the next 30 calendar days. Higher the India VIX values, higher would be the expected volatility and vice-versa. So far, the volatility index, expressed in a percentage figure, was shown at the end of the day. But now it will be displayed on a real time basis. NSE will also be applying to the capital market regulator SEBI for permission to start derivatives on the index, after it has been tracked for a suitable period. Once the futures and options start on the index, investors whose portfolios are affected by volatility in the market can use the product to hedge their risks.
India VIX is a volatility index based on the index option prices of NSE's benchmark index Nifty. Before starting derivatives on the volatility index, the index will be disseminated on a real time basis, so that market participants can understand the behaviour of the index, before trading on it. Volatility refers to the amount of uncertainty or risk about the size of changes in a security or index value. A higher volatility means that a scrip's value can potentially vary over a larger range of values. This means that the price of the security can change dramatically. A lower volatility means that a security's value does not fluctuate dramatically, but changes in value at a steady pace over a period of time.
