US Future Exchange partners BSE

After completing the process of demutualisation, the Bombay Stock Exchange has announced its first major strategic initiative...

After completing the process of demutualisation, the Bombay Stock Exchange (BSE) has announced its first major strategic initiative, along with the US Futures Exchange (USFE), that will allow dollar-denominated BSE Sensex futures to be traded on the USFE. The USFE’s Sensex contract will start trading from February 22, 2008 and will allow eligible US investors to directly participate in India’s equity markets without requiring American depository receipt (ADR) authorisation.

The size of the new USFE Sensex contract will be same as the existing BSE Sensex futures traded on the exchange and will be available for trading for 23 hours a day, Monday to Friday, and will be cash-settled. The new product will be marketed across the globe by MF Global, which owns a controlling stake in USFE.

“This agreement will provide the opportunity for US investors and global portfolio managers to gain exposure to India’s unprecedented economic growth, expansion and investment performance,” said Kevin Davis, chairman, USFE, while announcing the strategic tie-up with BSE.

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“The new product will be available to global investors for initiating their participation in the Indian market and at the same time help us in our effort to be a global player,” said BSE managing director and CEO Rajnikant Patel.

“In the past one year, volumes on the BSE derivative segment have increased to 3 per cent of the total F&O volume in the country and we are quite optimistic that the new initiative would definitely improve our business,” said Patel.

Market experts say the new strategic initiative by BSE will definitely help the exchange revive its ailing derivative segment, since at present it lacks the much-needed foreign participation to provide depth and liquidity. The new product will also help them in marketing the Sensex brand across global portfolio managers.

As we’ve often seen the impact of global factors on the Indian markets, the launch of the USFE Sensex futures will definitely help the domestic investors gauge the sentiment of global investors and take positions accordingly in the domestic market, said market sources.