Exchanges wrap world in web of index contracts

Exchanges wrap world in web of index contracts

The London Stock Exchange Group and National Stock Exchange of India have signed a letter of intent to explore collaboration, the first fruit of which is likely to be LSE gaining a licence to offer options on the S&P CNX Nifty 50 Index.

However, LSE will need to check that it can offer futures as these are already listed at Singapore Exchange and CME Group. The exchanges are also discussing licensing of FTSE indices to the NSE.

Nifty options have been highly successful at NSE, hitting record volumes this year, but India’s closely guarded financial markets make it hard for foreign investors to trade the contracts directly.

Meanwhile, Singapore Exchange has agreed a partnership with Eurex, in which the Frankfurt exchange will help to market and promote SGX’s new set of US dollar-denominated futures and options on the Euro Stoxx 50 Index of leading European stocks.

Plans for the contracts themselves were announced in March, with launch planned for the second half of this year, subject to Monetary Authority of Singapore approval.

Far from seeing the SGX move as competition for its own most popular instruments, which are denominated in euros, Eurex believes it will raise the profile of the Euro Stoxx 50 in Asia and hence raise volume in its own contracts.

“Through our cooperation, we extend the user base of Europe’s most liquid index derivatives contract,” said Michael Peters, a member of the Eurex executive board. “This will result in new trading and hedging opportunities globally and should further increase the liquidity of this benchmark product. Our partnership will also strengthen our position in Asia as a global exchange.”

Chew Sutat, head of corporate and market strategy at SGX, said: “The SGX EuroStoxx 50 Futures and Options on Futures contracts will complement our suite of Asian products, providing global customers with one-stop access to Asian and European equity markets as well as trading opportunities between SGX and Eurex.”

Collaboration quickens

The SGX-Eurex and NSE-LSE deals are just the latest steps in the process of international cooperation between exchanges in the field of equity index derivatives.

On August 30 Eurex will go live with a link enabling its members to trade futures on the Kospi 200 Options listed at Korea Exchange. This will create round-the-clock trading in the super-liquid instrument.

Eurex has also confirmed its intention to offer futures and options linked to the Bombay Stock Exchange’s Sensex index – a rival to the Nifty – from October 4.

Since November CME Group has offered after-hours access to the Kospi 200 Futures. NYSE Liffe is also preparing to launch in the fourth quarter of this year futures on the Topix Index of Japanese stocks, which will be fungible with those at the Tokyo Stock Exchange.

SGX has been a leader in cross-border index derivatives – it offers contracts on the Nikkei 225 Index, Nikkei 225 Dividend Index, S&P CNX Nifty Index of Indian shares, the MSCI Taiwan, MSCI Hong Kong and FTSE Xinhua China A50.

The SGX Euro Stoxx contracts will be the only ones listed by a major Asian exchange that reference stocks outside Asia.

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