NEXT Equity Index Futures are derivative instruments that give investors exposure to price movements on an underlying index. Market participants can profit from the price movements of a basket of equities without trading the individual constituents.

An index futures contract gives investors the ability to buy or sell an underlying listed financial instrument at a fixed price on a future date. These products are cash settled and easily accessible via NEXT members. The NSE shall initially construct Equity Index Futures contracts based on the NSE 25 Index.

NSE Derivatives Market
Category of contractEquity Index Future
Underlying financial instrument

Equity Index listed on the NSE

E.g. NSE25 Share Index – N25I

System codeJun19 N25I
Contract monthsQuarterly (March, June, September and December).
Expiry datesThird Thursday of expiry month. (If the expiry date is a public holiday then the previous business day will be used.)
Expiry times15H00 Kenyan time.
Listing programQuarterly
Valuation method on expiryBased on the volume weighted average price (VWAP) of the underlying instrument for liquid contracts, and the theoretical price (spot + cost of carry) for illiquid contracts.
Settlement methodologyCash settlement.
Contract size

One index point equals one hundred Kenyan

Shillings. (KES 100.00)

Minimum price movement (Quote spread)One index point (KES 100.00)
Initial Margin requirementsAs determined by the NSE Methodology.
Mark-to-marketExplicit daily. Based on the volume weighted average price (VWAP) of the underlying for liquid contracts, and the theoretical price (spot + cost of carry) for illiquid contracts.
Market trading times

As determined by the NSE

09H30 to 15H00 Kenyan time

Market fees

 

ParticipantPercentage
NSE Clear0.02%
Clearing Member0.02%
Trading Member0.08%
IPF Levy0.01%
CMA Fee0.01%
TOTAL0.14%

 

The percentages indicated above will be used to calculate the fees based on the notional contract value.

NEXT Equity Index Futures allow investors to get some form of “insurance” for their stock portfolio by protecting portfolios from potential price declines;

Benefits of trading NEXT Equity Index Futures

  • Price transparency and liquidity. These contracts can be sold as easily as they can be bought;
  • Lower transaction fees than those incurred when buying or selling the basket of securities making up the index;
  • Reduction of counter-party risk a result of trading via the exchange; and
  • Centralized clearing.