India's benchmark equity index, the Sensex, will soon be available for trading outside the country.
The Bombay Stock Exchange is in the process of listing Sensex futures on Europe's largest stock exchange by market value, the Frankfurt-based Deutsche Borse AG.
"The process will be complete soon and the index will start trading before the end of this calendar year," a senior BSE official said.
The Sensex was constituted in 1986 and features India's 30 largest and most actively traded stocks.
The gauge represents banking, oil and gas, telecom, information technology, auto and metal sectors among others, and accounts for around 50 per cent of the market capitalisation on BSE.
The exchange has an exclusive index cooperation agreement with the Deutsche Borse since 2007, when the German exchange picked up a 5 per cent stake in BSE.
BSE's range of indices include BSE-100, BSE-200, BSE-500 and the BSE DOLLEX. The exchange also has different sector indices.
BSE's move is crucial, as the futures contract of the S&P CNX Nifty index of its rival National Stock Exchange will start trading in the US from this month.
While Nifty can be traded in the US and Singapore (on SGX), traders in Europe and the US will also be now able to take positions in the Sensex futures. Both indices will draw further attention of large investors towards Indian markets.
Deutsche Borse dominates trading in German equities through its operation of the Frankfurt stock exchange and owns Eurex, Europe's largest derivatives exchange, which gives it a quasi-monopoly status in the region.
Also, it is the largest transatlantic derivatives' market place, as it owns US-based International Securities Exchange. The Deutsche Borse Market Data & Analytics calculates and publishes more than 2,100 indices in total and ranks among the world's major index providers.
Listing of the Sensex will be a major step in reviving the derivatives trade by BSE's new management team led by Madhu Kannan.
The team took charge nearly 18 months ago. Earlier, the exchange had tried to change the derivatives trading cycle by shifting the expiry to mid-month.
While it had led to minuscule volumes in the Sensex and some stock futures, there had been no spurt in volumes due to lack of market makers, said analysts.
The average daily turnover in futures and option market in India is close to Rs 1,00,000 crore (Rs 1,000 billion) and NSE is the monopoly player. On an average over half a million contracts of Nifty futures are traded in India.
Before the Sensex starts trading abroad, BSE expects to upgrade its technology and systems.
The exchange is in the process to bring both futures and spot trading on a single screen and launch co-location facility for algorythmic trading and increase trading members by cutting membership fees by 90 per cent from Rs 1 crore (Rs 10 million).
The exchange is also consolidating its clearing and settlement and depository business to provide end-to-end solutions to clients.
