The National Stock Exchange today launched its futures contracts on India VIX (volatility index) called 'NVIX' to help investors hedge near-term volatility risks in their equity portfolio and clocked a volume of Rs 325 crore on the first day of trade.
This is the first time that a product has been launched in India on a volatility index through which investors can hedge the volatility risk. NSE has been disseminating the India VIX index since 2009.
NVIX witnessed trading volumes of Rs 325 crore and 227 members participated in trading in NVIX, NSE said in a statement here.
"We have a very liquid options market, and that really gave us the stepping stone to create a product of this stature. Three years of dissemination of the product (India VIX) and tracking of the product by one and all has given the comfort to all of you and of course to the regulator to approve this product. NSE is committed to creating awareness on the product among institutions, clients and members," NSE MD and CEO Chitra Ramkrishna told reporters after the launch.
NSE has also offered a rebate on transaction charges for members, to encourage participation in the product. This will be applicable till March 31.
NVIX futures will help market participants to hedge volatility risk, balance portfolios and express views on expected volatility.
NVIX futures is traded in the F&O segment of NSE. All market participants are currently permitted to participate in the F&O segment. There will be 3 weekly futures contracts expiring on every Tuesday of the week. The lot size of NVIX contracts is 750 and tick size is Rs 0.25. The India VIX index is calculated upto 4 decimals with a tick of 0.0025.
The volatility index has been introduced in several developed and emerging markets. The first volatility index and volatility index derivatives were introduced by CBOE.
This is viewed as a major step to deepen the equity derivatives market further and provide an asset class which is currently missing in the domestic capital markets.