NSE seeks Sebi nod for index options

NSE seeks Sebi nod for index options

NEW DELHI, OCT 2: The National Stock Exchange (NSE) is awaiting Securities and Exchange Board of India's (SEBI) green signal for starting trade in index options, the second derivative product after index futures, by this fiscal. "We are ready with the necessary software for options trade in the exchange. The exchange is waiting for the SEBI green signal," NSE vice-president M L Soneji said.

The SEBI committee on derivatives, headed by J R Varma, is currently drawing up the regulation of risk containment for options as well as covered warrants on individual stocks. Soneji said NSE, in the meantime, is carrying out investor awareness programmes through open houses in all major cities, in order to boost the derivatives trade in India.

"The response on Nifty futures has been more pronounced in Singapore than in India primarily because of the greater awareness of investors in that country," Soneji said. There were 97 contracts for the Nifty futures amounting to $2.42 million, which was five times the value of Nifty contracts in India on the opening day on September 25.

"The main driver of the Nifty futures in Singapore has been the foreign institutional investors (FIIs) who now have the opportunity of arbitrage between the two bourses," R Sundaraman, assistance vice-president and heading NSE's derivatives segment said. NSE is also engaged in the process of developing a system of portfolio margining of products to find out the ultimate risk. This would help investors to hedge risk, Soneji said.

The exchange would soon move over to rolling settlement system, he said. At present, a few selected scrip under Nifty is under the compulsory rolling settlement system. As directed by SEBI, all the scrip would be moved for rolling settlement within the next few months.

Soneji said NSE would offer an exit route for investors who have to compulsorily settle their trades within a specified period by offering a 'Continuous Net Settlement (CNS)' system. NSE would soon make a formal application for introducing CNS to SEBI, he said. The exchange is also developing a modified version of the automated lending and borrowing mechanism (ALBM) by November 15, the NSE official said.

The Automatic Lending Borrowing Mechanism, an improved version of the existing ALBM, would facilitate investors by matching the buyers and sellers positions automatically, he explained.