The Securities and Exchange Board of India (SEBI), the country's financial regulator, has permitted stock exchanges in India to list foreign index derivatives denominated in rupees.
Bourses in India including the National Stock Exchange and Bombay Stock Exchange, which account for the majority of trading volume in the country, can now offer domestic investors the ability to trade derivatives based on foreign indices from 24 different markets. Each exchange will need to apply to SEBI and detail their risk management processes before they can list index derivatives.
To be listed on an Indian exchange, the foreign stock index must be among the top 15 index derivatives globally in terms of trading volume or have a market capitalisation of at least US$100 billion. There must also be a minimum of 10 stocks in each index and no single stock can account for more than 25% of the market capitalisation of an entire index. If an index fails to meet these criteria for three consecutive months, no fresh index contract will be introduced.
Exchanges on which the index derivatives can be listed include Brazil's BM&F Bovespa, Chicago Board Options Exchange, Eurex, the Korea Exchange, NYSE Liffe, and Hong Kong Exchanges and Clearing.