IISL plans 3 contracts in futures

MUMBAI/KOCHI, Nov 6: India Index Services and Product Ltd (IISL), the 50:50 joint venture company floated to provide stock market derivat...

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MUMBAI/KOCHI, Nov 6: India Index Services and Product Ltd (IISL), the 50:50 joint venture company floated to provide stock market derivatives by country’s premier financial service provider National Stock Exchange (NSE) and rating major Crisil will launch three simultaneous contracts in index futures once the government of India okays derivative trading in the country. The Securities Act Amendment Bill based on the LC Gupta panel report on derivatives trading has got the Central cabinet clearance long back but is pending before the Parliament for final approval.

The Gupta Committee, which was constituted for framing the rules and regulations for kicking off derivative trading in the country has suggested a phased introduction of stock market derivative products in a manner that would provide ample time for the market and the regulators to understand the concept. The committee has suggested the introduction of index futures first followed by index options and stock options.

Index futures refers toforward contracts based on stock market indices based on a set of underlying securities with which the market participants hedge their risk on the basis of their view on the movement of the index.Kicking off the two-month long nation-wide awareness campaign on stock market derivatives here on Saturday, NSE vice-president Asish Kumar Chauhan and IISL chief executive officer Arup Mukharjee said that the company is fully geared up to kick off the index futures once the Parliament clears the Securities Act Amendment Bill. "We will start the trading in index futures within sixty days once the Parliament passes the bill", they said.

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They said the new product will be launched by IISL in association with global rating giant Standard & Poor, the technology partner of IISL, on the NSE platform already available throughout the country. IISL in association with S&P had branded the NSE 50 stock index NIFTY by rechristening it as S&P CNX Nifty. National Stock Exchange is the first stock exchange in India to brand itsindex so far with Bombay Stock Exchange to follow soon.

S&P CNX Nifty is based on 50 most liquid stocks listed on NSE in terms of their impact cost.

They said the IISL would offer two types of memberships for trading in derivatives; trading and clearing membership. Trading membership would be offered at a cost of Rs 8 lakh as membership fee and another Rs 50 lakh as interest free deposit in cash and bank guarantee. Clearing membership would be offered to corporate entities at a cost of Rs three crore and another Rs 50 crore as interest free deposit, they added.

They said according to the LC Gupta panel recommendations, the minimum size for trade offered to investors would be Rs 2 lakh. "We will decide about the market lot and size once the government of India and Sebi gives the final clearance," they said. They said the company has at present engaged in organising educational seminars for investors and traders. Starting Kochi, the company would conduct such exercises in 25 other centres withintwo months, they said. The IISL will float another company with a corpus of over Rs 50 crore for providing counter party guarantee to index futures trade.