Indians can trade in global indices within a month

Indian investors can start trading in large indices of 24 exchanges worldwide within a month, following market regulator Sebi's approval for the same.

Securities and Exchange Board of India (Sebi) has given the green signal to domestic exchanges to offer trading in derivatives contracts of these global indices, including those in the US, Europe and Asia.

Bourses are giving the final touch. Investors can start trading in these global indices within a month, according to sources in both the Bombay Stock Exchange (BSE) and National Stock Exchange (NSE).

However, one of the world's largest bourse the London Stock Exchange (LSE), with whom two Indian exchanges NSE and MCX SX have tied up for cross listing of their indices, is not on the list approved by Sebi for the new guidelines.

Sources said that LSE is not in the approved list since derivative trading is not conducted in that bourse.

The London exchange's benchmark index -- FTSE 100 -- is traded on many other global exchanges, which are part of the Sebi-approved list of 24 bourses.

"It has been decided to permit stock exchanges to introduce derivatives contracts (Future and Options) on foreign stock indices in the equity derivatives segment," 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," the circular noted.

Trading in derivatives on foreign indices would be restricted to Indian residents only.

The market regulator also pointed out that after the 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.

In March 2010, National Stock Exchange (NSE), the largest stock exchange in India, and CME Group, the world's leading and most diverse derivatives marketplace announced cross-listing arrangements, including licence agreements covering benchmark indices for the US and Indian equities.

This had allowed S&P 500 and Dow Jones Industrial Average to trade in NSE, subject to regulatory approvals.

Besides, BSE has similar arrangement with Eurex Frankfurt AG, Europe's leading financial futures exchange.