India Clears New Derivatives On Index Designed For Foreigners

The National Stock Exchange of India Ltd. has received approval from the Securities and Exchange Board of India to introduce futures and options tied to the Nifty India FPI 150 Index, according to people familiar with the matter who asked not to be named discussing private information. The gauge, launched last August, tracks 150 stocks selected based on ease of accessibility for foreign investors - something global benchmark providers such as MSCI Inc. typically take into account to select their index members.

An NSE representative declined to comment, citing its pending initial public offering. SEBI didn't reply to an email seeking comment.

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NSE, which reaped more than two-thirds of its revenue from derivatives in the last fiscal year, is seeking to boost its offerings ahead of its listing targeted for September. Meanwhile, India wants to lure back foreign investors after an equity slump triggered months of outflows.

The FPI 150 gauge already has dollar-denominated derivatives tied to it in GIFT City, an offshore venue with tax advantages, though there were no contracts outstanding as of the latest date available. The rupee contracts would be listed in Mumbai and add to the suite of futures and options NSE offers on several of its gauges, including the benchmark NSE Nifty 50 Index and the NSE Nifty Bank Index.

The proposal to launch onshore derivatives on the FPI 150 was first disclosed in the exchange's draft IPO prospectus filed with SEBI last month.

In recent years, SEBI has tightened rules on equity derivatives trading to curb excessive retail speculation, leading to a slump in volume. Still, exchanges are allowed to launch new contracts subject to regulatory approval.

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