Leading stock exchange BSE has received approval from capital markets regulator Securities and Exchange Board of India (SEBI) to launch derivative contracts on the "BSE Focused Midcap Index," which will allow it to expand its derivates basket at a time when exchanges have moved to a single weekly expiry structure. Currently, the country's oldest stock exchange only offers derivatives only on the Sensex and Bankex indices. With the approval, the derivatives basket for BSE will move to three indices.
''This is to inform that BSE has received approval from the Securities and Exchange Board of India (SEBI) to launch derivative contracts on the "BSE Focused Midcap Index". The index measures the performance of the top 20 constituents based on the free float market capitalisation within mid capitalised stocks. Exchange will offer cash settled monthly index futures and monthly index options with expiry date as the last Thursday of the expiry period,'' said BSE in a stock exchange filing on Feb. 13.
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The launch of derivatives on a focused midcap index could likely attract traders and investors seeking a targeted exposure to quality mid-sized companies, especially in a market where broader midcap indices have seen sharp swings. The BSE Focused Midcap Index measures the performance of the top 20 constituents based on free-float market capitalisation within the midcap segment.
The index is designed to offer concentrated exposure to leading mid-sized firms rather than the broader midcap universe. Following SEBI's directives, stock exchanges now offer only one weekly expiry per exchange to curb the excessive speculative activity and reduce concentration risk. On the other hand, the National Stock Exchange of India (NSE) offers derivatives on five indices, including the Nifty, Nifty Bank, Nifty Financial Services, Nifty Midcap Select and Nifty Next50.
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Meanwhile, SEBI has stopped the country's two newest exchanges from launching equity derivatives and asked them to build up trading in cash equities, according to news agency Reuters. The move affects the National Commodity and Derivatives Exchange and the Metropolitan Stock Exchange, both of which had approached the regulator for approval to enter equity cash and derivatives trading. SEBI has set a minimum time gap between the start of cash equity trading and the launch of equity derivatives. The regulator wants exchanges to establish a liquid and active cash market before allowing derivative products.
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