Saturday, Jul 15, 2017
Dubai: Indian traders may prefer to hedge on DGCX amid an increasing crackdown on instruments like Promissory Notes (P-notes) even as the regulator is growing risk averse on derivative instruments.
The Indian regulator is worried about the large presence of individual investors, who may not have financial capability to withstand risk, according to a paper published by the regulator last week.
The regulator plans to create a balanced participation in equity derivatives, and has hinted at changing position limits for traders considering the profile of investors among others.
According to analysts, this move may backfire and instead derivatives trading may shift to a more nimble bourse like Dubai Gold and Commodities Exchange.
“If access becomes increasingly difficult, such investors will need alternative safe and secure venues that facilitate such trades. We will fill the gap,” said DGCX’s Desai. “We are the only exchange outside India to provide Indian stock futures,” he added.
An expanding product line is also what is attracting Indian traders on the bourse.
“We are expanding available trading months for single stock futures, we also plan to add a new spread contract to allow inter-month rollovers,” Desai said.
Currently the SSF volumes equate to an average notional daily traded value of $70 million, or Dh257 million.
Desai has high hopes from the recently launched calendar spreads, which can be complemented with other trading strategies.
“It can become a multiplier effect depending on how you complement your calendar spreads with other hedging needs, and therefore returns can be multiplied too,” Desai said.
“Over the coming months we could expect an increase in spread volumes. This will impact the overall volumes because it is a cost efficient way of taking price risk,” he added.
Currently, calendar spreads contributes to 6-10 per cent of the total exchange volume, and in the first half of the year, spreads contributed to 9 per cent of the exchange volumes.
“In the last month DGCX has definitely achieved positive traction in calendar spreads, and hopefully this will continue,” he added.
By Siddesh Suresh Mayenkar Senior Reporter
Gulf News 2017. All rights reserved.