Come Thursday and Indian investors will be able to hedge and gain exposure to the London Stock Exchange, through derivative contracts of UK's FTSE 100 index on National Stock Exchange.
The FTSE 100 index, informally called the 'footsie', is a share index of the stocks of the 100 companies listed on the London Stock Exchange having the highest market value.
For the Indian investors, the rupee-denominated contracts will be traded during normal Indian market hours.
In order to promote participation in the contracts, NSE has decided not to levy any transaction fee for the first six months. Futures contracts, forward contracts and options are the most common types of derivatives, generally used as an instrument to hedge risk from an underlying asset. The NSE has also announced cash incentives to brokers and clients to develop the market for the foreign index in India. NSE has said that all the member brokers of its equity derivatives segment will be able to trade in these derivatives through existing infrastructure. Besides, NSE has been conducting investor awareness sessions in small groups with member brokers to create awareness on derivative contracts of FTSE 100. These sessions are being conducted in all the metros and in Tier-II and Tier-III cities. The FTSE 100 derivative launch, spearheaded by the London Stock Exchange Group (LSEG), FTSE and NSE, is part of FTSE's global reach and NSE's commitment to further develop the Indian securities market. "The FTSE 100 Index, will help Indian investors to diversify their portfolios further and have access to one of the world's widely tracked equity indices, whilst minimising currency risk," NSE Managing Director and CEO Ravi Narain had said. Last month, NSE had announced that it has received regulatory approval, to start trading futures and options contracts, based on FTSE 100. In January, 2012, Securities and Exchange Board of India (Sebi) gave green signal to domestic exchanges to offer trading in derivatives contracts of key indices or 24 stock exchange from across the world. However, UK-based bourse LSE is not in the approved list since derivatives trading is not conducted in that bourse. Still, derivatives trade in the London exchange's benchmark index FTSE 100 can be launched on Indian bourses as the index is traded on many other global exchanges, which are part of the Sebi-approved list of 24 bourses.