The availability of the US dollar denominated Sensex futures contract through US Futures Exchange (USFE) to eligible investors across the globe will prove to be a blessing in disguise for those global investors (including hedge funds) who want to take an India exposure but could not do so in the backdrop of new regulatory regime put in place by the Indian capital market regulator Securities and Exchange Board of India (Sebi) recently.
In an exclusive interview to The Financial Express, Kevin Davis, chairman, USFE, said, “There is a huge possibility that global investors who want to participate in the India growth story will like this product. Exposure to emerging markets, particularly India, is now essential for institutional portfolio management and retail investors alike. This product will provide the opportunity for US investors to gain exposure to India’s unprecedented economic growth, expansion and investment performance.”
However, Davis added, “We have tremendous amount of respect for the Indian regulator as we have been interacting with Sebi almost on the regular basis.” This he said in the context of Sebi’s recent guidelines on the issuance of participatory notes (PNs) by the foreign institutional investors (FIIs) registered with it.
Sebi recently disallowed those FIIs and their sub-accounts from issue of overseas derivatives instruments (ODIs) with immediate effect, who are not registered with it. Sebi also insisted that henceforth only entities regulated by the regulators in their home jurisdiction and not the registered will be allowed to take exposure through ODIs in the Indian market. The Sebi move was intended to bring in more transparency in investible funds flowing to the Indian market.
Davis also indicated that based on the success of the dollar denominated Sensex futures to be marketed by MF Global across 14 markets worldwide, USFE may explore the opportunity of introducing various other products based on BSE’s other measures dedicated various sectors.
MF Global, the world’s largest distributor of futures and options products, holds majority of stake in USFE and as a result of that its CEO Kevin Davis holds the post of chairman in the USFE.