NSE biggest derivatives bourse for 3 years in a row, shows data

Volumes in CY21 jump 2x to 17.3 billion

The National Stock Exchange (NSE) has emerged as the top global bourse in terms of derivatives contracts traded for the third year in a row. Around 17.3 billion derivatives contracts were traded on the NSE in 2021, nearly double that of 8.9 billion traded in 2020.

The country’s top bourse was ahead of the US’ CME Group and Brazil’s B3, which clocked volumes of 11.3 billion and 9.3 billion contracts, respectively, the data provided by industry body World Federation of Exchanges showed.

Technically, the number of derivatives contracts traded in the US are far higher, but liquidity is fragmented among different trading venues, such as the CME Group, Nasdaq, and CBOE group.

Despite that, the NSE's feat is significant as India’s market capitalisation at $3.75 trillion is only a fraction of $52 billion of the US -- the world’s biggest stock market. Also, Indian authorities take a conservative approach towards derivatives trading as many see it as excessively speculative.

“It is a matter of great pride for us and for our country that the NSE has emerged as a global leader and achieved the distinction of being the largest derivatives exchange in the world for the third consecutive year. We are truly grateful to the Government of India, Sebi, the RBI, trading & clearing members, market participants, and all our stakeholders for the support extended to us over the years,” said Vikram Limaye, MD & CEO, NSE, in a release.

Many frown at the NSE’s high derivatives turnover in relation to its cash market turnover. However, the exchange said the ratio has been on the decline as cash volumes are growing at a faster clip.

“In the last 10 years, equity derivatives' daily average turnover increased by 4.2 times from Rs 33,305 crore in 2011 to Rs 1,41,267 crore in 2021. During the same period, the cash market daily average turnover increased by 6.2 times from Rs 11,187 crore in 2011 to Rs 69,644 crore in 2021. The equity derivatives-to-cash market turnover ratio has steadily declined from 2.98 in 2011 to 2.03 in 2021,” the exchange said.

The NSE also cited research that shows a strong derivatives market helps improve liquidity and enhance price discovery for the cash segment.

When it comes to the cash segment, the NSE was the world’s fourth-biggest exchange in terms of the number of trades in 2021.

Market players say India’s tax structure and margin requirements on trading are higher compared to global standards which weigh on trading volumes.

The NSE’s most successful derivatives offerings were Bank Nifty and the Nifty50 index, which generated the highest volume globally at an individual product level.