The CME Group would be looking at bringing energy, commodities and fixed income products from its basket in India in the future, Scot Warren, managing director of equity index products and index services, tells Mehul Shah and Palak Shah. Edited excerpts:
What is your take on the response received by futures contracts on S&P 500 and DJIA so far? (The average daily turnover in DJIA futures was Rs 50.18 crore and Rs 63.66 crore for S&P 500 futures and options till Monday)
We are very pleased with the initial response. For a new product, activity levels of several thousand contracts a day, is extraordinary. Our history in launching products indicates this is a long-term effort. It is going to take substantial commitment to market and investor education to build the market. But, the initial levels indicate a positive response and validate the work done by NSE, CME and the index companies.
What type of market players do you think will be interested in these products?
When we look at NSE’s business model and the level of retail activity, in the size of contract, you see retail as well the trading community will be interested. One of the things very important to us in working with NSE is that we look at our own contract specifications and our contracts trade, with a notional value of $50,000. In the Nifty product traded on the NSE has a notional value of about $4,000. From the start, we recognised the mismatch in sort of the product specifications and what would be right product for market participants. This allowed us to come by a unique product offering by NSE.
Which are the other products you would like to bring to the Indian market in future?
We have a very large franchise in energy,commodities as well as fixed income. And those are natural abilities for us to extend our index services capability and our price discovery function into meeting investor demand. Having said that, creating a new index and launching it in the market not only require the commitment of the market centre, but a very deep working relationship with the end-users. You have to understand what risk they have exposure they want to hedge or what represents the investment vehicle they want.
Nifty E-mini contracts are doing better than E-Micro contracts on CME? Why?
What we are primarily trying to do is build up a client base. SGX also has a very successful franchise. We are trying not to move business between CME and SGX, but grow the market. This is more about working with the investment community in Europe and the US about what their investment needs are in the Indian market. So, you are working with asset allocation strategies as well as growing an operational infrastructure. We are confident that we will be able to provide the right product for that.
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