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The BRICS Securities and Derivatives Markets4.3 Financial derivatives marketThe NSE is not only the largest exchange in India in terms of contract volume of financialderivatives but also a prominent derivatives exchange in the world. It ranked 3 rd in terms ofaggregate derivatives volume in 2011, behind Korea Exchange (KRX) and CME Group 7 .Among the various product types, index options are the most actively traded, surpassingcurrency futures in 2011/12 — contributing 40% of the NSE’s total derivatives volume,compared to 32% for currency futures (see Figure 4-3). In respect of trading activity byunderlying, option contracts on the S&P CNX Nifty Index were the most active in the year2011, contributing 39% of the total 8 . It was followed by futures contracts on US dollar (US$)against Indian Rupee (32%), option contracts on US$ against Indian Rupee (11%) and futurescontracts on the S&P CNX Nifty Index (6%). Stock futures and stock options accountedfor 7.3% and 1.5% respectively of the total (see Table 4-1).Table 4-1. Top 5 derivatives products by contract volume on NSE (2011)Rank Derivatives Contract volume % of total1 S&P CNX Nifty Index Options 868,684,582 39.5%2 US Dollar/Indian Rupee Futures 697,825,411 31.7%3 US Dollar/Indian Rupee Options 252,807,126 11.5%4 S&P CNX Nifty Index Futures 123,144,880 5.6%5 EUR/Indian Rupee Futures 18,065,186 0.8%- All individual stock futures 160,878,260 7.3%- All individual stock options 33,172,963 1.5%- Others 45,788,242 2.1%All NSE products 2,200,366,650 100.0%Source: FIA statisticsAlthough the BSE is the first exchange to offer equity derivatives in India (SENSEX futuresin 2000), it captured only a 1%-3% market share in equity derivatives each year in the pastdecade. In view of this lacklustre performance, the BSE introduced a series of LiquidityEnhancement Incentive Programmes (LEIPS) in late September 2011 to boost lastingliquidity in the segment. As a result, total trading volume in the BSE derivatives marketincreased from 6,000 contracts in 2010/11 to 32 million contracts in 2011/12 contributedmainly by equity derivatives — 77% in 2011/12 by index options and 22% by index futuresproducts (mainly SENSEX Index futures). (See Figure 4-3.)78Source: FIA statistics. It should be noted that the contract sizes of the NSE’s products are much smallerthan the US standards. For example, the multiplier of the NSE’s S&P CNX Nifty Index futures/options isINR100 (US$1.9 as of end-2011) per index point, with a contract size of US$8,324, compared with US$50per index point for CME’s E-mini S&P 500 Index futures, with a contract size of US$62,880 as of end-2011;the contract size of the NSE’s US dollar/Indian Rupee futures/options is US$1,000, compared with €125,000(US$162,156) for CME’s Euro FX futures.Source: FIA statistics- 16 - Research & Corporate Development, HKEx31 December 2012
Number of contracts (million)Number of contracts (million)The BRICS Securities and Derivatives MarketsFigure 4-3.NSEContract volume of all financial derivatives on the NSE and the BSE(2002/03 – 2011/12)2,5002,0001,5001,0005000[ ] Total contract volume( ) % share[17] [57] [77]Contract volume of financial derivatives in NSE (2002/03 - 2011/12)[690]33212[425](31%)[219] 55222[158]204(48%)81 10581 157[1,058]33379(36%)341(32%)[1,784]3714712(40%)651(36%)36[2,179]272(12%)701(32%)864(40%)(32%) 146 186 158210(30%)178 165 1462002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12Reporting yearIndex Futures Stock Futures Index OptionsBSE3530Stock Options Currency Futures Currency OptionsContract volume of financial derivatives in BSE (2002/03 - 2011/12)[ ] Total contract volume( ) % share[32]252025(77%)151050[0.1] [0.4] [0.5] [0.0002][1.8]2[7.5]7(96%)[0.7][0.009] [0.006]7(22%)2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12Reporting yearIndex Futures Stock Futures Index Options Currency FuturesNotes:(1) The reporting year covers April each year to March the following year.(2) Contract volume figures of the NSE’s interest rate futures and the BSE’s stock options are too small to beidentifiable in the chart.(3) The volume of the BSE’s products grew very strongly in 2011/12 after the launch of a series of LiquidityEnhancement Incentive Programmes in late September 2011.Sources: NSE statistics and SEBI BulletinsIn the BRICS Exchange Alliance, futures on SENSEX, one of the benchmark indices of theIndian stock market, is the cross-listed product. Figure 4-4 shows the monthly tradingvolume of SENSEX Index futures on the BSE from January 2011 to June 2012 (where data isavailable) and the daily closing of the underlying index for the past decade. The averagedaily volume was 57,433 contracts in 2012 up to June.- 17 - Research & Corporate Development, HKEx31 December 2012
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Page 3 and 4: Contracts (million)CME GroupKorea E
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Page 7 and 8: IBOVESPA daily closing (points)Futu
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Page 29 and 30: Daily index closing (points)Futures

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