India halves margins on single stock trades

India halves margins on single stock trades

From July 15, exchanges must require at least 5% of the contract’s notional value, instead of 10%. That rate was imposed in October 2008 after the Lehman Brothers collapse.

The SEBI took the decision after discussions with market participants.

An executive at a futures commission merchant in Mumbai welcomed the decision, saying the higher margins had hit the retail market hardest and depressed trading of single stock futures and options.

In 2008, some 225.72m single stock futures and options were traded, but this fell to 161.05m trades in the following year.

The National Stock Exchange of India hosts 99% of listed single stock derivative trading in India. Its rival the Bombay Stock Exchange had hoped a more attractive fee structure, introduced in December 2009, would help it win back market share, but it has so far been unsuccessful.

Colin Packham, Sydney cpackham@fow.com

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