U.S. Futures Exchange Launches USD SENSEX India Equity Index Futures

By David Kendall   ISSUE 704 | APRIL 2008

On April 4, 2008, the U.S. Futures Exchange (USFE) launched the first Indian equity index futures contract tradable on a U.S. regulated exchange – the USD SENSEX future. USD SENSEX is based on the first-ever created Indian equity index, but is converted into U.S. dollars. It is designed to be as tradable as other popular electronically traded stock futures contracts, but with twice the volatility. With both U.S. and Indian trading hours and an underlying market uncorrelated to U.S. equities, USD SENSEX futures can form an ideal complement to one's current equity trading portfolio.

Background

In 1986, the Bombay Stock Exchange (BSE) compiled the first index to cover the Indian equity markets. The index is comprised of the 30 largest Indian companies by market capitalization. The index was named the Sensitive Index, or SENSEX for short. It has since become the benchmark for the Indian market, akin to the Dow Jones Industrial Average in the U.S. The BSE has since launched futures on the SENSEX, but the average U.S. trader was excluded based on Indian regulation. That was unfortunate, since the SENSEX has seen very dramatic run-ups and good trading opportunities. For example, in 2007 the index appreciated by more than 60 percent.

BSE SENSEX Historical Performance

In November 2007, USFE obtained an exclusive license to launch U.S.-dollar based futures on this historic index, giving U.S. investors unprecedented access to this growing market. In addition, USFE converted the Indian rupee dependence within the SENSEX to U.S. dollars. The conversion protects traders from rupee rate dependence, unless one is actively hedging the instrument. The future is also appropriately sized for individual traders. At $100 per index point, the overall notional value of the contract is under $42,000 and current margin rates make USD SENSEX futures an affordable addition to a trading portfolio. The spread during India hours has been around three ticks on average, with $10 tick sizes.

The USD SENSEX presents a new opportunity for futures traders. It is uncorrelated to the U.S. market and has twice the volatility of the S&P 500. This makes USD SENSEX an affordable opportunity to gain exposure to one of the fastest-growing markets in the world. As with all USFE products, you can easily access this market using your Lind-Waldock futures account and open your portfolio to Indian market returns.

Contract Details

Lind-Waldock clients can trade or track data on SENSEX futures using the symbol FSSX on LindConnect or Lind Xpress.

David Kendall, PhD is director of product development at USFE. To learn more about this product and others at USFE, you can visit the USFE's web site at www.USFE.com. Contact Lind-Waldock to get started trading at 800-445-2000.

Kristina Zurla Landgraf is editor of Lind eWire. She can be reached by email at editor@lind-waldock.com.

Past performance is not necessarily indicative of future trading results. Trading advice is based on information taken from trade and statistical services and other sources which Lind-Waldock believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades. All trading decisions will be made by the account holder.

Futures trading involves substantial risk of loss and is not suitable for all investors.

MFGlobal Inc.'s parent company has an ownership interest in the United States Futures Exchange ("USFE"). MFGlobal's associated persons may receive additional compensation for transactions on USFE. This additional compensation will not result in any additional charge to your account.

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