The National Stock Exchange (NSE) has received a go-ahead from the US equity and commodity derivatives regulator CFTC or Commodity Futures Trading Commission to sell its products to investors based out of the US. With this approval in place, the institutional investors in the US will be able to trade in derivative listed on the NSE with no restrictions.
The institutional investors in the US can trade only in derivatives that have the approval from the CFTC. Hence, this development will likely boost inflows into the derivatives market in India from institutional investors based out of the US.
In an earlier instance till last year, these funds took the promissory note route for trading in Indian futures as this was not deemed as direct exposure to the futures market in India. But as the SEBI decided to ban p-note participants from taking unhedged position, these funds were left with no option to trade in single-stock futures.
Investors from the US willing to trade in index futures are also not providing the avenue as both the NSE and BSE have ended their arrangement of data sharing with offshore bourses. Consequently such investors take exposure in offshore avenues such as Singapore Exchange (SGX). To this effect, SGX nifty accounts for over half of the index derivatives volume.
Market participants view this approval by CFTC to be a good deal for Indian derivatives market as it may attract an increasing number of hedge funds.