A super-developed market for derivatives

The equity derivatives segment is the most vibrant, active and dominant segment in the Indian securities market. Over the years, there has been manifold increase in its volumes – both in terms of the number of contracts traded as well as traded value and products traded. India holds a significant place in the arena of world derivatives markets. In recent years the equity derivatives segment has been the most traded and valued segment. Its turnover to GDP ratio for 2015-16 stood at 511, which in itself illustrates the kind of liquidity that this market has. The World Federation of Exchanges (WFE) in its 2015 report said that the traded volumes exceeded 2011 levels and the Asia Pacific region was responsible for a large proportion of this growth. According to the report, NSE accounted for nearly 50 per cent of total global volumes in stock index options. The total turnover in 2015-16 in the derivatives segment was approximately 14 times the turnover in the cash market, but was 8.8 per cent lower than the total futures and options (F&O) turnover recorded in 2014-15 (Chart 2.10). NSE had a majority share in trading volumes at 93.5 per cent in 2015-16, while BSE contributed only 6.5 per cent, a marked decline from the previous year’s contribution of 26.8 per cent.

That was from the Annual Report of the Securities and Exchange Board of India for 2015-16 released yesterday (page 63 of the report and page 94 of the PDF document). In the world, the ratio of outstanding derivatives contracts went as high as 10 times to GDP in 2007-08. That did not make the world economy more developed. It made the world economy more unstable. QED.

In its annual ‘Indian Securities Market Overview 2015’ (ISMR 2015), the National Stock Exchange makes no effort to hide its pride and pleasure in being one of the top five  exchanges in the world on several parameters of derivatives trading – be it in stocks, stock indices or currencies.

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