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NATIONAL STOCK EXCHANGE

Life After Lehman. NATIONAL STOCK EXCHANGE. April 20, 2009. Ravi Narain, MD&CEO, NSE, India. The year that was … 2008. Increased Volatility Reduced liquidity Many participants vanished Counterparty credit risk enhanced CCP a better option Derivatives volume grew, but at a slower pace

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NATIONAL STOCK EXCHANGE

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  1. Life After Lehman NATIONAL STOCK EXCHANGE April 20, 2009 Ravi Narain, MD&CEO, NSE, India

  2. The year that was … 2008 • Increased Volatility • Reduced liquidity • Many participants vanished • Counterparty credit risk enhanced • CCP a better option • Derivatives volume grew, but at a slower pace • Difference in behavior • Futures and options • Different asset classes • Emerging markets different patterns?

  3. Increase in Volume; reduced growth Global Derivatives Volumes Source: FIA

  4. Growth by asset classes Reduced growth; Negative growth rate for interest products Agri products fared better Equity and equity index – growth was good Source: FIA

  5. Option vs futures • Futures % have gone up while options came down • Growth rates have come down in 2008 • Futures more drastically than options!

  6. Increased volatility Annualised volatility

  7. Developed markets- who pulled out? • Hedge funds pulled out the most ? • Redemption calls? • Losing strategies? • Reducing leverage? • Traditional customers pulled out the least? • Pension funds? • Mutual funds, etc?

  8. Emerging Markets different? • No major change in trading pattern • Individuals/retail – continue to be the stronghold/same • In HK, Principal trading has increased • % of Foreigners interest in Korea almost same *Others include insurance cos., investment cos, and Banks

  9. Who traded at NSE derivatives • Number of contracts traded has increased • FII activity has come down in terms of % not in terms of contracts • Domestic prop and institutional activity has increased • No variation in retail activity among the last three quarters

  10. Top Emerging exchanges by growth % Emerging Market Exchanges with growth % >50 considered. Seven of them are from Asia and two from Russia.

  11. Indian Scene – NSE equity derivatives Average daily traded volume ( million contracts)

  12. Index products

  13. So, where do we look for future growth?

  14. Future growth? • No single solution • Depends on the market • Emerging markets have a good retail base • Retail base bolsters liquidity domestically • Can reduce volatility in volumes • Indian Experience • India has good retail volumes and has tremendous scope • Household savings to Capital Market

  15. Future growth? • Emerging markets do not have all asset classes for trading • Introduce new asset classes • Introduce new products • Indian experience

  16. THANKS

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