National Stock Exchange (NSE) has become the largest exchange in the world in terms of the number of trades in stock futures. From January till now, a total of six crore futures contracts in individual stocks were traded on NSE, according to the data available with the World Federation of Exchanges (WFE). In the last calendar year, NSE occupied the second position.
Eurex is at the second position with 5.5 crore contracts. Eurex is one of the largest derivative exchanges in the world and a leading clearing corporation in Europe. Johannesburg Stock Exchange, which ranked first in 2008, has been relegated to the fourth position in the stock futures segment with a 47% drop in traded volume during the first quarter of 2009, said an analyst.
Investors use derivative instruments like index options and stock futures to hedge the risk to their cash market portfolio. In the options segment, which has picked up in the past six months due to high level of uncertainty in share prices, NSE has notched up its position. It has climbed to the third position in terms of the number of contracts traded in the index options segment from the fourth position in 2008 among global exchanges. The number of contracts traded in index options on NSE stood at 10.10 crore in 2009 till date as compared to 88.30 crore traded in Korea Exchange and 14.29 crore contracts in the Eurex.
Experts say that NSE enjoys an edge in derivatives business because of its efficient clearing system and high liquidity driven by large retail participation. NSE commands almost 99% market share in the equity derivatives market in India. In March 2009, retail investors constituted 56.47% of the gross traded value in the derivatives segment compared to institutional investors? share of just 12.66%.
Rajesh Dharmshi, director -institutional trading at Motilal Oswal Financial Services, said, ?Retail participation is a major factor driving the volumes higher. With a robust and transparent trading system in place, investors and traders feel more comfortable dealing in NSE derivative segment.?
Currently, NSE facilitates trading in eight indices and futures contract are available on 233 stocks. The average daily volumes were on the lower side of around Rs 44,000 crore during 2008-09. But it witnessed a record number of trades in the futures and options segment on January 7, 2009, which stood at 18.74 lakh traded contracts.
?NSE has delivered a stable and robust trading platform to its members by offering well designed products backed by strong risk management back-end coupled with efficient operations processes, thereby allowing the market to scale up significantly in terms of traded volumes. By constantly taking suggestions and feedback from market participants on product development and operational enhancements it has been successful in its endeavour to gain a pre-eminent position,? said, Nikhil Johari, vice-president, Edelweiss Securities Ltd.