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Struggling to keep up the pace with rival exchanges in the derivatives space, Bombay Stock Exchange Ltd (BSE) has now pinned its hopes on newly launched currency derivatives and the upcoming interest rates derivatives to draw robust participation.
The exchange is also considering bringing market makers in the interest rate derivatives, to be launched by the end of January.
“We have been able to achieve around 15-20 % of the market share in the currency derivatives segment within just a month of launch. Now we are focusing on interest rate derivatives, which we will launch in the fourth week of January, BSE MD and CEO Ashishkumar Chauhan told Business Line after a traders meet in Ahmedabad on Tuesday.
He mentioned that with foray into the interest rate derivatives, India’s oldest exchange will be able to offer cash settled non-deliverable funds (NDF) market including instruments such as 10-year government bonds and other debt instruments.
The interest rate derivative acts as hedge against the uncertain interest rate movements. Many people are exposed to the interest rates, be it through home loan, car loan, business loan or personal loan. Interest rates are a part of one’s life, said Chauhan.
The National Stock Exchange (NSE) had launched interest rate derivatives in 2009.
Meanwhile, currency derivatives help investors hedge their currency exposures by offering trading between two currency pairs, such as the dollar and the rupee.
On Wednesday, BSE currency derivatives recorded turnover of Rs 952 crore with 1,52,295 contracts, while on the NSE, the same was recorded at Rs 6,720 crore with 10,27,917 contracts.
Chauhan also maintained that market makers were important for successful derivatives market. They add value by providing additional liquidity in the market. BSE already has 50 market makers for SME market. BSE will also have designate market makers for interest rate derivatives as we have for currency and equity F&O, he said adding that BSE’s platform has adopted using BOLT + technology for currency derivatives, while equity and interest rate derivatives will be next.
BSE had acquired the technology from Germany's Deutsche Boerse. Chauhan claimed that BSE trading platform’s speed to execute trades has increased to 200 microseconds, making it the fastest platform in India.
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