The Bombay Stock Exchange (BSE) is planning to launch ‘cash future spread’ (CFS), a derivative product that would reduce the risk of arbitrage between future and cash segments of stocks.
BSE is conducting trial runs for the CFS from August 1 and is expected to launch it by August 6. “Having a single product for cash-future trade that eliminates execution risk has an interesting outcome for the investors by offering them an interest rate type of product. It shall be launched on August 6,” said Ashishkumar Chauhan, interim CEO, BSE.
Arbitrage is done through short and long positions by traders in stocks and its future contract with a view to exploit pricing of the same stock to make profit. Currently, those wanting to take advantage of the spread between cash and futures have to enter four different trades - they buy in futures and sell in cash and then reverse the trade to square off the position, he said.
With inputs from PTI