1. NATIONAL STOCK EXCHANGE Life After Lehman 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? 2

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 4 Source: FIA

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

6. Increased volatility 6 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? 7

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 16