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FUTURE OF DERIVATIVES IN INDIA

Introduction

Derivatives markets in 1865 when the Chicago Board of Trade (CBOT) has listed the first "listed" derivatives contract with the United States. These contracts are called futures contracts. "In 1919, butter and egg Chicago Board, a spin-off of the CBOT, was reorganized to allow futures exchanges. Its name was changed to Chicago Mercantile Exchange ( GCE). The first stock index futures contract was traded to Kansas City Board of Trade. Currently, the most popular stock index futures in the world is based on the Standard & Poor's 500 Index traded on the CME. In April 1973, the Chicago Board of Options Exchange was created specifically for the purpose of trading options. The options market developed so rapidly that by the early 80s the number of shares underlying the option contract sold each day exceeded the daily volume of shares traded on the New York Stock Exchange. And there is no looking back since.

Derivatives India

The word "derivatives" Date math and refers to a variable, which was derived from another variable. Derivatives are so called because they have no intrinsic value. They derive their value from the value of certain other assets, which is known as the underlying.

"Derivative products are specialized contracts which mean an agreement or an option to buy or sell the underlying asset of the derivative to some time in the future at a predetermined price, the exercise price."

The contract also has an expiration period set mainly in the range of 3 to 12 months from the date of commencement of the contract. The value of the contract depends on the expiration period and also on the price of the underlying asset. There are several types of financial instruments which are grouped under the term derivatives, but the options / futures and swaps are among the most common. Options and futures are the different types of contracts where one party agrees to pay a fee to the other for the right to buy or sell something to another.

Derivatives markets in India have existed in one form or other for a long period. In the field of commodities, cotton Bombay Trade Association began operations in 1875 and eventually, by the early 1900s India has one of the largest industries in the world to run. In 1952 the government banned a cash settlement and trading options and derivatives shifted to the informal markets before. In recent years, government policy has changed, allowing a greater role for market prices and less suspicion of derivatives trading. The ban on futures trading of many commodities has been lifted from the early 2000s, national electronic commodity exchanges have been created.

In equity markets, a trading system called "Badler" involving elements of the prior trading had been in existence for decades.6 However, the system has led to a number of undesirable practices and are prohibited on and off until the Securities and Exchange Board of India (SEBI), he banned for good in 2001. A series of reforms in the stock market between 1993 and 1996 paved the way for the development of markets for equity derivatives traded in India. In 1993, the government created the NSE, in collaboration with state-owned financial institutions. NSE has improved the efficiency and transparency of stock markets by offering a fully automated trading system on display and dissemination of real-time prices. In 1995, a ban on options trading was lifted. In 1996, the NGA sent a proposal to SEBI for listing exchange-traded derivatives.

Economic liberalization in the early nineties has facilitated the introduction of derivatives based on interest rates and exchange rates. Systematization.