NSE gets CFTC approval to sell its products to US-based investors

Mumbai, May 18: The National Stock Exchange (NSE) has received an approval from the US derivatives regulator Commodity Futures Trading Commission (CFTC) to sell its products to US-based investors. Going forward, US-based institutional investors will be able to trade in NSE-listed derivatives without any restrictions. The development will boost inflows coming into Indian derivatives from US-based institutions. The approval had been in the pipeline for more than a year now.
The US equity and commodity derivatives are regulated by CFTC and institutional investors based in the US are allowed to invest only in those derivatives that are CFTC-approved.
Until last year, these funds used to take the participatory note (p-note) route to trade in Indian futures, as this did not amount to direct exposure. However, the Indian markets regulator Securities and Exchange Board of India’s (Sebi’s) decision to ban p-note participants from taking unhedged positions in the futures market left these funds without any route to trade in Indian single-stock futures.
Also, investors who wanted an exposure to index futures used off-shore destinations such as the Singapore Exchange (SGX) to take exposure. Even this avenue has now been closed as Indian stock exchanges have terminated their data-sharing arrangements with foreign bourses.
Indian market participants have been concerned about the export of Indian derivative markets to off-shore destinations. Until the recent snapping of ties with bourses, SGX Nifty accounted for more than half of the index derivatives volume.
Market participants say CFTC approval could be a huge advantage for Indian markets, as it would attract more hedge funds. In the past two decades, hedge funds have emerged as a crucial set of investors in developed markets.