NSE launches joint awareness campaign on Global Indices

Company Brief

Chennai, September 16, 2011

The National Stock Exchange (NSE) on Monday launched a nationwide awareness campaign on its futures linked to the global indices S&P 500 and Dow Jones Industrial Average and options linked to S&P 500, which were listed on the exchange recently. The exchange is doing a joint campaign with senior officials from the Chicago Mercantile Exchange (CME) group, Standard and Poor’s and Dow Jones Indexes. Starting with Mumbai , the joint campaign is covering the cities of Ahmedabad, Delhi, Kolkata and Chennai over the week.

This is the first time in the world that futures contracts on the S&P 500 index have been introduced and listed on an exchange outside of their home country, USA and creating awareness about the products is critical to generate interest among Indian investors in the indices. Since the time of the launch (29th August, 2011) derivatives on the two indices have been clocking in a daily average of around 4000 contracts, with wide participation across the country.

In the joint campaign , CME is being represented by Mr. Scot Warren, Head of Equity index products and services, CME Group, Standard and Poor’s by Ms. RoopaKudva, MD and CEO of Crisil and Region head, South Asia and Mr. Craig Lazzara, Product head, S&P and Dow Jones Indexes by Mr. Jamie Farmer, Executive Director, Global Business Development and Communications.

NSE will focus on the importance of the cross listing agreement, on the advantages of trading the products on NSE and the incentives announced. CME will be focusing on their experiences in the US on the way the two indices trade, the kind of participants who trade on these indices, etc. Both S&P and Dow Jones Indexes will stress the uniqueness of the indices, what makes the indices move in the US markets and S&P’s experience of trading options on the Chicago Board of Options Exchange.

In addition to the investor awareness campaign, NSE hopes to broaden market participation in the global indices (futures on S&P 500 and DJIA and options on S&P 500) through the Liquidity Enhancement Scheme (LES), i.e. incentives announced by the exchange, which come into effect from the 15th of September, 2011.

Announcing the formal launch , MD and CEO of NSE, Mr. Ravi Narain said “We have got very good feedback from the market on the incentive schemes that we have announced on derivative products of S&P 500 and DJIA. We have had a good start and we hope that volumes will pick up further, as the liquidity enhancement scheme kicks in and the advantages of the products are understood better’’.

In June 2011, SEBI had permitted exchanges to introduce LES in specific securities, subject to fulfillment of the stipulated conditions for a maximum period of six months. The introduction of LES by NSE is in line with the circular issued by SEBI.

Internationally, exchanges introduce such schemes in order to enhance liquidity, particularly in newly launched products. Trading interest is observed to be enhanced by Liquidity Enhancement Scheme (LES) in products having inherent potential. When there are multiple competing products, LES acts as an important incentive to attract the attention of market participants and thus generate liquidity in the long run.

The scheme is open to all market participants, i.e. it shall include the members and their clients as well. The scheme provides a three tier incentive structure, i.e. order level, trade level and open interest level.

With regard to the order level incentive, all market participants fulfilling the stipulated obligations and criteria shall be eligible to receive incentives on a proportionate basis from a pool allocated in this regard.

In respect of trade level incentives, a buy trade shall entail an incentive of Rs.400 per crore and a sell trade Rs.1700 per crore. The incentive will be given on the basis of the contract value of the futures contract and in the case of options, on the basis of premium paid for the contracts.

In respect of Open interest level incentives, top five participants in terms of the total open interest shall be provided incentives from a specifically allocated pool for this purpose.

All these incentives are subject to applicable limits and conditions as detailed in the circular, issued on 29th August, 2011.

Also, NSE shall not be levying any transaction charges on the trades done in these contracts from the date of commencement till February 29, 2012. The above referred incentives through LES are over and above this waiver of transaction charges.

Speaking on the cross listing agreement with NSE which enabled introduction of this product and their India strategy, Mr. Scot Warren, Managing Director, Equity Index Products & Services, CME Group said, "We congratulate the NSE on today’sformal launch of the S&P 500 and Dow Jones Industrial Average index futures contracts & Options linked S & P 500. We continue to expand our business globally through our international partnerships, and this marks another milestone in our agreement with the NSE following the launch of the E-mini and E-micro futures contracts based on the S&P CNX Nifty (Nifty 50) Index earlier this year."

Ms. RoopaKudva said: “S&P Indices, for the first time in its history, has licensed an entity outside the U.S. to list S&P 500 futures & options contracts. S&P Indices is proud of its longstanding partnership with the CME Group of 29 years for index futures and of its 28-year partnership with the Chicago Board of Options Exchange (CBOE). We are looking forward to the same longevity with the National Stock Exchange of India and to having the honour of providing Indian investors with exposure to the US equity markets in Indian rupees.”

Mr. Jamie Farmer said: “The listing of Dow Jones Industrial Average futures on the NSE is clearly a landmark event for the Indian market. As one of the world’s most widely recognised financial brands, the DJIA has proven to be a reliable barometer of American business and finance for 115 years. Now, with this listing, Indian investors have access to the U.S. markets as never before.”

NSE has been conducting awareness road shows on the global indices for the past few months. Seminars have been held with member brokers and market participants in different parts of the country.

NSE has put in place an exclusive web page in its web site, providing information on these indices http://www.nseindia.com/products/content/gi/product_gi.htm . With the introduction of these products and LES, Indian investors are going to have the advantage of an international asset class, coupled with an incentive scheme.

For further information, please contact:

Ketchum Sampark PR

Krishna Moorthy

Mobile: +919442191717

Email: krishnamoorthy.s@ketchumsampark.com