The Indian regulators have eased trading rules on domestic future positions, which is expected to trigger a major boost in over-the-counter derivatives volumes. "This ultimately makes the market easier for foreigners to trade--we'll see a lot more index-level hedging," said Justin Kennedy, managing director in Asia-Pacific equity derivatives at Citigroup in Hong Kong. "This has already had a dramatic effect on the amount of interest we've seen from clients," he added.
The Securities and Exchange Board of India recently issued a circular stating that foreign institutional investors may enter long index futures positions as long as they do not exceed their cash and government securities holdings and they may go short to the extent of their underlying cash equity positions. Previously positions in index futures by foreign investors were capped at USD20 million. "In comparison, now the sky's almost the limit," said one trader.
Equity players have anticipated the changes for several months after receiving initial indications by SEBI that it was planning to further open the domestic market (DW, 4/16).
