There are other benefits as well. Currently, at the time of doing the two simultaneous trades involved in a rollover, if the markets are too volatile, traders may end up paying too much of a difference while rolling over. The rollover contract that NSE is planning will eliminate this. This will help not only traders, but also cut down unnecessary work for brokers, who now have to coordinate the two legs of the rollover trade separately.
In overseas markets, even derivatives on calender spreads are traded to take a view on interest rates in the money market. For instance, the Chicago Mercantile Exchange has listed options on Eurodollar calendar spreads, enabling traders to take a position on the direction and volatility of the one-year Libor spread.
NSE controls more than 95% of equity derivatives trading in the country and brokers say the lack of healthy competition has stymied the introduction of market friendly measures. “A valid question to ask is why the NSE didn’t think of this earlier,” says one expert on securities market infrastructure who didn’t want to be identified.
Competition from the Bombay Stock Exchange, Asia’s oldest exchange, is insignificant. Though BSE had introduced rollover contracts earlier, derivatives volumes on this exchange are very small and are no threat to NSE.
mobis.p@livemint.com
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