Derivative- Indian Scenario (2)hgvg

8/19/2019 Derivative- Indian Scenario (2)hgvg

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Project Report

On

“DERIVATIVES – INDIAN SCENARIO”

Submitted to university of Mumbai inPartial fulfilment

Of the requirement of the degree of TY. BACHELOR OF FINANCIAL MARKETS

Under guidance of

PROF. SHEETAL MANUDHANE

VPM’S!"! #oshi $ollege of arts

%!"! &ede'ar $ollege of commerce(hane )*+

,cademic year- ./012./03

&y-2,rchana P Mehra

Roll! %o! 44


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DECLARATION

5 am ,rchana P Mehra studying in (6! 7inancial Mar'ets hereby declares that 5have done my project on 8erivative mar'et 5ndian scenario! ,s required by theuniversity rules9 5 state that the *or' presented in this project is original andgenuine to the best of the 'no*ledge!

:henever references have been made to the *or' of other9 it is clearly indicated

in the source of information in reference!

Student ),rchana P Mehra+

Place- (hane

8ate-


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ACKNOWLEDEGEMENT 5t gives me an immense pleasure to declare that my project on 8;R5V,(5V;S < 5%85,%S$;%,R5O have been prepared purely from the point of vie* of a student’s requirement!

5 am indebted to our principal 8r! Mrs! Sha'untala Singh madam for giving such an a*esomeopportunity! 5 am also than'ful to our coordinator Mr! 8!M! Murdesh*ar sir and also =iberianand my colleagues for their valuable support9 cooperation and encouragement in completingmy project!

Special than's to Prof! Sheetal Manudhane miss my internal guide for this project for givingme e>pert guidance9 full support and encouragement in completing my project successfully!

5 also ta'e the opportunity to than' my parents for giving me guidance and for their patienceand understanding me *hile 5 am busy in my project *or'!

=astly9 5 am than'ful to "od for giving me strength9 spirit and also his blessings for completingmy project successfully!


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INDEX

PARTI CULARS PAGE NO.

1 s t C!"t#$ .

I%t$&'()t *&% & + D#$ *,!t *,#s

0 !0 8er i va t i ve 8ef i ned

0 !. (ypes o f 8er i va t i ve mar 'e t

0 !? (ypes of 8er iva t ive

0 !4 O t he r ' i nds o f 8er i va t i ve

0 !1 &enef i t s o f 8er i va t i ve

-

% ' C!"t#$ .

I%'*!% D#$ *,!t *,#s M!$/#t. !0 8er i va t i ve mar 'e t i n 5 nd i a

. !. ;vo l u t i on o f 8er i va t i ve i n

5 nd i a

. !? 7ac t o r s con t r i bu t i ng t o g r o*t h o f

8er i va t i ves

10

$ ' C!"t#$ .

D#,# 2&"3#%t & + D#$ *,!t *,#s 3!$/#t *%

I%'*!

? !0 8er i va t i ve p r oduc t s t r aded a t &S;

? !. 8er i va t i ve p r oduc t s t r aded a t %S;

4

5 t C!"t#$ .

P$#s#%t s t! t(s & + I%'*!% D#$ *,!t *,#s

3!$/#t

6

F*%'*%7s !%' s(77#s t * &%s 5-

C&%)2(s *&% 54


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EXECUTIVE SUMMARY

: i t h o v e r . 1 m i l l i o n s h a r e h o l d e r s 9 5 n d i a h a s t h e t h i r d l a r g e s t i n v e s t o r bas e in the * or ld a f t e r US, and #ap an ! Over @1// comp an i es a r e l i s t ed ont h e 5 n di a n s t oc ' e > ch a ng e s! ( h e 5 n di a n c a p it a l m a r' e t i s s i gn i fi c an t i nt e r ms o f t h e d e g r e e o f d e v e l o p m e n t9 v o l u me o f t r a d i n g 9 t r a n s p ar e n c y a n d

i ts t re m en d ou s g r o* t h p o te n ti a l! 5 n di a ’s m a r' e t c a pi t al i Aa t io n * a s t h eh i g h e s t a m o n g t h e e m e r g i n g m a r ' e t s ! ( o t a l m a r ' e t c a p i t a l i A a t i o n o f ( h e& o m b a y S t o c ' ; > c h a n g e ) & S ; + 9 * h i c h 9 a s o n # u l y ? 0 9 0 B B @ 9 * a s U S C 0 @ 1 b i l l ion has g r o*n b y ?@ !1 D pe rce n t ev e r y t*e lve mon ths ! &o mba y S to c' ; > c h a n ge s ) & S ; + 9 o n e o f t h e o l d e s t i n t h e * o r l d9 a c c o u n t s f o r t h e l a r ge s tnumber o f l i s t ed compan i es t r ans ac t i ng t he i r s ha r es on a na t i on*i de on l i net r ad i ng s ys te m! (het *o ma j o r e>changes namel y t he %a t i ona l S t oc' ;>change ) %S;+ and t he& o m b a y S t o c ' ; > c h a n g e ) & S ; + r a n ' e d n o ! ? E 1 i n t h e * o r l d 9 c a l c u l at e d b y t he number o f da i l y t r ansac t i ons done o n the e>c hanges ! :ith da i l yave r ag e vo lu me o f

USC B !4 b i l l i on 9 t he Sens e> has pos t ed e>ce l l en t r e t u r ns i n t he r ecen t yea r s ! 8 er iv at iv es t ra di ng i n t he s to c' m ar 'e t h av e b ee n a s ub je ct o f en t hus i a s m o f r e s ea r ch i n t he f i e l d o f f i nance t he mos t des i r ed i ns t r umen t stha t a l lo* ma r'e t pa r t i c ip an t s t o man age r i s ' i n th e mo d ern s ecur i t i e s t r ad in g a re 'n o*n asde r i va t i ves ! (he de r i va t i ves a r e de f i ned a s t he f u t u r e con t r ac t s *hos e va l ue depends upon t he unde r l y i ng a s s e t s ! 5 f de r i va t i ves a r e i n t r oduced i n t hes t oc' mar 'e t 9 t he unde r l y i ng a s s e t may be any t h i ng a s componen t o f s t oc' mar ' e t l i 'e 9s t oc' p r i ces o r mar 'e t i nd i ces 9 i n t e r e s t r a t e s 9 e t c ! (he ma i n l og i c beh i ndd e ri v a ti v es t r ad i ng i s t h at d e ri v at i ve s r e du c e t h e r i s' b y p r ov i di n g a n

a d d i t io n a l c h a n n e l t o i n v e st * i t h l o * e r t r a d in g c o s t a n d i t f a c i l i ta t e s t h ei nv e st or s t o e >t en d t he ir s et tl em en t t hr ou g h t he f ut ur e c o nt ra ct s! 5 t p ro v ides e> t ra l iqu i d i t y in the s toc' mar' e t ! 8er i va t ives a re a s s e t s 9 *h i chd e r i v e t h e i r v a l u e s f r o m a n u n d e r l yi n g a s s e t ! ( h e s e u n d e r ly i n g a s s e t s a r eo f va r i ous ca t egor i e s l i 'eF $ommodi t i e s i nc l ud i ng g r a i ns 9 co f f ee beans 9 e t c !FP r ec i ous me t a l s l i 'e go l d and s i l ve r !F7or e i gn e>change r a t e !F&onds o f d i f f e r en t t ypes 9 i nc l ud i ng med i um t o l ong t e r m nego t i ab l e deb ts ecur i t i e s i s s ued by gove r nmen t s 9 compan i es 9 e t c !FShor t 2 t e r m deb t s ecu r i t i e s s uch a s ( 2b i l l s !F Ov er 2( he 2$ ou nt er ) O( $+ m on ey m ar 'e t p ro du ct s s uc h a s l oa ns o r depos i t s !F ; q u i t i e s 7 o r e > a m p l e 9 a d o l l a r f o r * a r d i s a d e r i v a t i v e c o n t r a c t 9 * h i c hg i ves t he buye r a r i gh t E an ob l i ga t i on t o buy do l l a r s a t s ome f u t u r e da t e !( he p ri ce s o f t he d e ri va t iv es a re d ri ve n b y t he s po t p ri ce s o f t he seu n d e r l y i n g a s s e t s ! G o * e v e r 9 t h e m o s t i m p o r t a n t u s e o f d e r i v a t i v e s i s i nt r a n s f e r r i n g m a r ' e t r i s ' 9 c a l l e d G e d g i n g 9 * h i c h i s a p r o t e c t i o n a g a i n s tl os se s r es ul ti ng f ro m u n fo re se en p ri ce o r v o la t i li ty c ha n ge s! ( hu s9de r i va t i ves a r e a ve r y i mpor t an t t oo l o f r i s ' managemen t !


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Need and Importance of the StudyWorld fnancial market has witnessed a spectacular change in the feld o Derivative markets in the past one decade, especially in the feld o option,utures and swaps. India also could not become aloo rom the world trend

and mainly ater the liberalization has set in motion. India introduced thedierent types in phased manner. derivative market has gainedmomentum since its introduction in India and has played a ma!or role inIndian fnancial markets. "oday the derivative volume in India is #s. $%&&&crores. In this conte't the study o (urrent scenario o Indian derivativemarket is very conte'tual and important as well. "hat is why this sub!ect isthe topic o this dissertation.)imilarly, on the e*uity market, many retail investors who are uncomortableabout the e*uity market would enter i they were given the alternative o buyinginsurance, which controls their downside risk. "his would enhance the action

o thesavings o the country, which are routed through the e*uity market. +oreimportantly,derivative is one o the important tools o hedging risk. "hereore, the studyo currentscenario o derivative market in India is very importance.

RESARCH METHODOLOGYMet hod o f da t a co l l ec t i on - 2S # ) & % ' !$ 8 s & ( $ )# s 9 :( h e d a t a f o r s t u d y h a s b e e n c o l l e c t e d f r o m v a r i o u s

s our ces - &oo's

MagaA i nes

5 n t e r ne t s our ces

OB;ECTIVES OF THE STUDY

"o study the current scenario o derivatives market in India.

• (o under s t and t he concep t o f t he 8er i va t i ves and 8er i va t i ve ( r ad i ng !

• (o 'no* t he r o l e o f de r i va t i ves t r ad i ng i n 5 nd i a !

•

(o ana l yAe t he pe r f o r mance o f 8er i va t i ves ( r ad i ng !

SCOPE OF THE PRO;ECT( he p ro je ct c ov er s t he d er iv at iv es ma r' et a nd i ts i ns tr um en ts ! 7 or be t t e r u nde r s tan d ing va r i ous s t r a t eg ie s * i th d i f fe r en t s i tua t io ns andac t i ons have been g i ven ! 5 t i nc l udes t he da t a co l l ec t ed i n t he r ecen t yea r sa n d a l s o t h e m a r ' e t i n t h e d e r i v a t i v e s i n t h e r e c e n t y e a r s ! ( h i s s t u d ye> t ends t o t he t r ad i ng o f de r i va t i ves done i n t he %a t i ona l S t oc' Mar 'e t s !

LIMITATONS OF STUDY


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0 ! = 5 M5 (;8 (5 M;-( h e t i m e a v a i l a b l e t o c o n d u c t t h e s t u d y * a s o n l y . m o n t h s ! 5 t b e i n g a*i de t op i c had a l i m i t ed t i me !. . =5 M5 (;8 R;SOUR$;S-= im it ed r es ou rc es a re a va il ab le t o c o ll ec t t he i nf or ma ti on a bo ut t hecommodi t y t r ad i ng !

?! VO=,(,=5(6-S h a r e m a r ' e t i s s o m u c h v o l a t i l e a n d i t i s d i f f i c u l t t o f o r e c a s t a n y t h i n gabou t i t *he t he r you t r ade t h r ough on l i ne o r o f f l i ne4 ! , S P ; $ ( S $ O V ; R , "; - S o m e o f t h e a s p e c t s m a y n o t b e c o v e r e d i n m ys tudy!

CHAPTER 1

INTRODUCTI ON TO DER IVATIVE, 8er i va t i ve i s a f i nanc i a l i n s t r umen t *hos e va l ue depen ds on o t he r 9 mor e bas ic 9 u nde r l y i ng va r i ab l e s ! (he va r i ab le s unde r l y in g cou l d be p r i ces o f

t r ade d s ecur i t i e s and s toc' 9 p r i ces o f g o ld o r copper !8er iva t i ves have beco me i nc r eas i ng l y i mpor t an t i n t he f i e l d o f f i nance 9Opt i ons and 7u t u r es a r e t r aded ac t i ve l y on many e>ch anges 9 7or *ar dcon t r ac t s 9 S*ap and d i f f e r en t t ypes o f op t i ons a r e r egu l a r l y t r aded ou t s i dee > ch a n ge s b y f i na n c ia l i n tu i ti o ns 9 b a n' s a n d t h ei r c o rp o ra t e c l ie n ts i n*ha t a r e t e r med as ove r 2 t he 2 coun t e r mar 'e t s < i n o t he r *or ds 9 t he r e i s nos i ng l e mar 'e t p l ace o r o r gan i Aed e>changes !( h e o r i g i n o f d e r i v a t i v e s c a n b e t r a c e d b a c ' t o t h e n e e d o f f a r m e r s t o p ro te c t themselves ag ainst fluctuations in the price of thei r cr op ! 7rom the time it*as so*n to the time it *as ready for harvest9 farmers *ould face price uncertainty!


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(hrough the use of simple derivative products9 it *as possible for the farmer to partially or fully transfer price ris's by loc'ing2in asset prices! 5n 0H4H9 the $hicago &oard Of (rade9 or $&O(9 *as established to bring farmers and merchants together! , group of traders gottogether and created the Ito2arrive’ contract that permitted farmers to loc' into price upfront anddeliver the grain lat er! (hese to2arrive con tracts p roved useful as a device for hedgingand speculation on price charges! (hese *ere eventually standardiAed9 and in 0B.1 the first

futures clearing house came into e>istence! (oday derivatives contracts e>ist on a lot of financialunderlying li'e stoc's9 interest rate9 e>change rate9 etc!

1.1 DERIVATIVE DEFINED

, derivative is a product *hose value is derived from the value of one or more underlyingvariables or assets in a contractual manner! (he underlying asset can be equity9 fore>9 commodityor any other asset! (he 7or*ards $ontracts )Regulation+ ,ct9 0B1.9 regulates the for*ardJfuturescontracts in commodities all over 5ndia! Go*ever *hen derivatives trading in securities *asintroduced in .//09 the term KsecurityL in the Securities $ontracts )Regulation+ ,ct9 0B13)S$R,+9 *as amended to include derivative contracts in securities! $onsequently9 regulation of derivatives came under the purvie* of Securities ;>change &oard of 5ndia )S;&5+! :e thus haveseparate regulatory authorities for securities and commodity derivativemar'ets!,derivative is securities under the S$R, and hence the trading of derivatives is governed by the regulatory frame*or' under the S$R,!

1. TYPES OF DERIVATIVES MARKET

0+ ;>change (raded 8erivative .+ Over (he $ounter 8erivative

%ational Stoc' ;>change &ombay Stoc' ;>change %ational $ommodity 8erivative

;>change

1. TYPES OF DERIVATIVES

8erivatives

7or*ards 7utures Options S*aps

FORWARD CONTRACTS

, for*ard contract is an agreement to buy or sel l an asset on a specified da tef o r a s p ec i fi e d p r ic e ! O n e o f t h e p a rt ie s t o t h e c o nt r ac t a s su m es a l o ng pos it ion and ag rees to buy the under lying as set on a cer ta in speci fi ed fu tu re da te for a certain specified price! (he other party assumes a short position and agrees to sellthe asset on the same date for the same price! Other contract details li'e deliverydate9 price and quantity are negotiated bilaterally b y t h e p a r t i e s t o t h e


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c o n t r a c t ! ( h e f o r * a r d c o n t r a c t s a r e n o r m a l l y t r a d e d outside thee>changes!&,S5$ 7;,(UR;S O7 7OR:,R8 $O%(R,$(F (hey are bilateral contracts and hence e>posed to counter2party ris'!F ;ach contract is custom designed9 and hence is unique in terms of contract siAe9 e>piration date and theasset type and quality!

F (he contract price is generally not available in public domain!F On the e>piration date9 the contract has to be settled by delivery of the asset!F 5f the party *ishes to reverse the contract9 it has to compulsorily go to the same coun t e r 2 pa r t y9 *h ich o f t en r e su l t s in h i gh p r i c es b e ing ch a rged !

FUTURE CONTRACT

5n finance9 a futures contract is a standardiAed contract9 traded on a futures e>change9 to buy or sell a certain underlying instrument at a certain date in the future9 at a pre2set price! (he futuredate is called the delivery date or final settlement date! (he pre2set price is called the futures price! (he price of the underlying asset on the delivery date is called the settlement price! (hesettlement price9 normally9 converges to*ards the futures price on the delivery date! , futurescontract gives the holder the right and the obligation to buy or sell9 *hich differs from an optionscontract9 *hich gives the buyer the right9 but not the obligation9 and the option *riter )seller+ theobligation9 but not the right! (o e>it the commitment9 the holder of a futures position has to sellhis long position or buy bac' his short position9 effectively closing out the futures position and itscontract obligations! 7utures contracts are e>change traded derivatives! (he e>change acts ascounter party on all contracts9 sets margin requirements9 etc!&,S5$ 7;,(UR;S O7 7U(UR; $O%(R,$(

• StandardiAation

• (he underlying2 (his can be anything from a barrel of s*eet crude oil to a short term

interest rate!

• (he type of settlement9 either cash settlement or physical settlement!

• (he grade of the deliverable! 5n case of bonds9 this specifies *hich bonds can bedelivered! 5n case of physical commodities9 this specifies not only the qualityof the underlying goods but also the manner and location of delivery!. Mar g i n :, l t h o u g h t h e v a l u e o f a c o n t r a c t a t t i m e o f t r a d i n g s h o u l d b e A e r o 9i t s p r i ce constantly fluctuates! (his renders the o*ner liable to adverse changes invalue9 and creates a c redi t r is' to the e>change9 *ho a l*ays acts ascounterparty! (o minimiAe this ris'9 the e>change demands that contracto*ners post a form of collateral9 commonly 'no*n as Margin requirementsare *aived or reduced in some cases for hedgers *ho have physical o*nership of thecovered commodity or spread traders *ho have offsetting contracts balancing the

position!5nitial Margin i s paid by both bu yer and sel l er ! 5 t repr ese nts the los s ont ha t con t r ac t 9 a s de t e r mi ned by h i s t o r i ca l p r i ce changes 9 *h i ch i s no tl i ' e l y to be e>ceeded on a usual days trading! 5t may be 1D or 0/D of total contract price!Mar ' t o mar 'e t Mar g i n -& e c a u s e a s e r i e s o f a d v e r s e p r i c e c h a n g e s m a ye > h a u s t t h e i n i t i a l m a r g i n 9 a f u r t h e r m a r g i n 9 u s u a l l y c a ll e d v a r i a t i o n o r ma i n ten ance ma rg in 9 i s r equ i r ed b y thee>change ! (h i s i s ca l cu l a t ed by t he f u t u r es con t r ac t 9 i ! e ! ag r ee i ng on


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a pr ic e at th e en d of ea ch da y9 ca ll ed th e NsettlementN or mar'2to2mar'et price of the contract! (o understand the original practice9 consider that a futures trader9*hen ta'ing a position9 deposits money *ith the e>change9 called a NmarginN!(his is intended to protect the e>change against loss! ,t the end of every trading day9the contract is ma r' ed to i ts pre se nt mar 'e t v al ue !S e t t l e m e n t

Settlement is the act of consummating the contract9 and can be done in oneof t*o *ays9 as specified per type of futures contract-

• Physical settlement : ( h e a m o u n t s p e c if i ed o f t h e u n d e r ly in g a s se t o f t h e

contract is delivered by the seller of the contract to the e>change9 and by the e > c h a n g et o t h e b u y e r s o f t h e c o n t r a c t ! 5 n p r a c t i c e 9 i t o c c u r s o n l y o n ami nor i t y o f con t r ac t s ! Mos t a r e cance l l ed ou t by pur chas i ng a cove r ing position that is9 buying a contract to cancel out an earlier sale )covering ashort+9 or selling a contract to liquidate an earlier purchase )covering a long+!

• $ash settlement , c a s h p a y m e n t i s m a d e b a s e d o n t h e u n d e r l y i n g

reference rate9 such as a short term interest rate inde> such as ;uribor9 or theclosing value of a stoc' mar'et inde>! , futures contract might also opt to settle against

an inde> based on trade in a related spot mar'et!• ;>piry is the time *hen the final prices of the future are determined! 7or many

e q u i t y i n d e > a n d i n t e r e s t r a t e f u t u r e s c o n t r a c t s 9 t h i s h a p p e n on t h e = a s t (hursday of certain trading month! On this day the t. futures contract becomes the for*ard contract!

P R 5 $ 5 % " O 7 7 U ( U R ; $ O % ( R , $ (5n a futures contract9 for no arbitrage to be possible9 the price paid on

delivery )the for*ard price+ must be the same as the cost )including interest+of buying and storing the asset! 5n other *ords9 the rational for*ard pricerepresen ts the e>pected future value of the underlying discounted at the ris' free rate!(his relationship may be modified for storage costs9 dividends9 dividendyields9 and convenience yields! ,ny deviation from this equality allo*s for arbi trage as follo*s! 5n the case *here the for*ard price is higher-1. (he arbitrageur sells the futures contract and buys the underlying today )onthe spot mar'et+ *ith borro*ed money!.On t he de l i ve r y da t e 9 t he a r b i t r ageur hands ove r t he unde r l y i ng andreceives the agreed for*ard price!. Ge then repays the lender the borro*ed amount plus interest!

5. (he difference bet*een the t*o amounts is the arbitrage profit!5n the case *here the for*ard price is lo*er-1. (he arbitrageur buys the futures contract and sells the underlying today )onthe spot mar'et+ he invests the proceeds!. O n t h e d e l i v er y d a t e 9 h e c a s h e s i n t h e m a t u r e d i n v e s t me n t 9 * h i c hhas appreciated at the ris' free rate!. Ge then receives the underlying and pays the agreed for*ard price using thematured investment!5. (he difference bet*een the t*o amounts is the arbitrage profit!


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OPTIONS

, d e r i v a t i v e t r a n s a c t i o n t h a t g i v e s t h e o p t i o n h o l d e r t h e r i g h t b u t n o t t h e ob ligation to bu y or se ll the unde rlying asset at a price9 cal ledthe stri'e price9 during a period or on a specific date in e>change for paymentof a premium is 'no*n as Ioption’! Underlying asset refers to any asset that istraded! (he pr ice at *hich the underlying is traded is called the Istri'e price’! (here are

t*o types of options i!e!9 $,== OP(5O% E PU( OP(5O%

$,== OP(5O%- , contract that gives its o*ner the right but not the obligation to buy an underlying asset9stoc' or any financial asset9 at a specified price on or before a specif ied date is 'no*nas a I$all option’! (he o*ner ma'es a prof it provided he sells at a higher current price and buys at a lo*er future price!

PU( OP(5O%-, contract that gives its o*ner the right but not the obligation to sell an underlying asset2stoc' or any financial asset9 at a specified price on or before a specified dateis 'no*n as a IPut option’! (he o*ner ma'es a profit provided he buys at alo*er current price and sells at a higher future price! Gence9 no option *ill bee>ercised if the future price does not increase!Pu t and ca l l s a r e a l mos t a l *ays *r i t t en on equ i t i e s 9 a l t hough occas i ona l l y preference shares9 bonds and *arrants become the subject of options!

SWAPS

S * a p s a r e t r a n s a c t i o n s * h i c h o b l i g a t e t h e t * o p a r t i e s t o t h ec o n t r a c t t o e > c ha n ge a s e ri e s o f c a s h f l o* s a t s p e c i fi e d i n te r va l s'n o* n as pa yme nt or set t lement dates! (hey can be regarded as portfoliosof for*ards contracts! , c o n tr a ct * h er e b y t * o p a rt i es a g re e t oe>c han ge )s* ap+ pay men ts 9 bas ed on some not ional principle amount i scalled as a IS:,P’! 5n case of s*ap9 only the payment flo*s are e>changedand not the principle amount! (he t*o commonly used s*aps are-

5%(;R;S( R,(; S:,PS- 5nterest rate s*aps is an arrangement by *hich one par ty ag rees to e>ch ange his ser ies of fi>ed ra te interest payments to a par tyin e>change for his variable rate interest payments! (he fi>ed rate payer ta'es a short position in the for*ard c on t r ac t *her e as the f loa t i ng ra t e pa ye r t a'es along posit ion in the for*ard contract !

$URR;%$6 S:,PS- $urrency s*aps are an arrangement in *hich both the princ ip le amount and th e in te re st on loan in one cur rency ar e s*apped fo r the princ ip le and the in te rest p a y m e n t s o n l o a n i n a n o t h e r c u r r e n c y !( h e p a r t i e s to t h e s * a p c o n t r a c t o f currency generally hail from t*odifferent countries! (his arrangement allo*s the counter parties to borro* easily andcheaply in their home currencies! Under a currency s*ap9 cash flo*s to bee>changed are determined at the spot rate at a time *hen s*ap is done! Such cashflo*s are supposed to remain unaffected by subsequent changes in the e>change rates!

75%,%$5,=S:,P-7 i nanc i a l s *aps cons t i t u t e a f und i ng t echn i que *hi ch pe r mi ta bo rr o* er to access one mar'et and then e>change the liability for another


12/51

type of liabi li ty! 5t also allo*s the investors to e>change one type of asset for another type of asset *ith a preferred income stream!

1.5 OTHER KINDS OF DERIVATIVES

(he other 'ind of derivatives9 *hich are not9 much popular are as follo*s-&,S;(S: &as'ets options are option on portfolio of underlying asset! ;quity 5nde>

Options are most popular form of bas'ets!=;,PS: %ormal ly op tion contracts are fo r a pe riod of 0 to 0. months !Go*ever9 e > c h a n g e m a y i n t ro d u c e o p t i on c o n t ra c t s * i t h a m a t u ri t y pe r iod o f . 2 ? yea r s ! (hese long2term op tion con tract s are popu la rl y 'no*nas =eaps or =ong term ;quity ,nticipation Securities! :,RR,%(S: Options generally have lives of up to one year the majority of options traded on options e>changes having a ma>imum maturity of ninemonths ! =onger2dated options are called *arrants and are generally traded over2the2counter!S:,P(5O%S2 S * a p t i o n s a r e o p t i o n s t o b u y o r s e l l a s * a p t h a t * i l l beco me o pe ra t i ve a t t he e>pi ry of the opt ions! (hus a s*ap tion is anoption on a for*ard s*ap! Rather than have calls and puts9 the s*aptions mar'et hasreceiver s*aptions and payer s*aptions! , receiver s*aption is an option toreceive fi>ed and pay floating! , payer s*aption is an option to pay fi>ed andreceive floating!

1.0 BENEFITS OF DERIVATIVES8erivative mar'ets help investors in many different *ays-0Q R5S M,%,";M;%( ercise price9 the put option canal*ays be e>ercised!.Q PR5$; 85S$OV;R6


13/51

4Q M,R;( ;775$5;%$6 ploit arbitrage opportunities quic'ly and to 'eep prices in alignment! Gencethese mar'ets help to ensure that prices reflect true values!1Q ;,S; O7 SP;$U=,(5O% pected return is commensurate *iththe ris' that he is ta'ing! (he derivative mar'et performs a number of economicfunctions!F(he prices of derivatives converge *ith the prices of the underlying at the e>piration of derivative contract! (hus derivatives help in discovery of future as *ell as current prices!F,n important incidental benefit that flo*s from derivatives trading is that it acts as acatalyst for ne* entrepreneurial activity!F8erivatives mar'ets help increase savings and investment in the long run! (ransfer of ris' enables mar'et participants to e>pand their volume of activity!

M8ts !%' $#!2*t*#s ! futures!

(oday9 derivatives have become part and parcel of the day2to2day life for ordinary people

in major parts of the *orld! :hile this is true for

manycountries9 there are still apprehensions about the introduction of derivatives!(here ar

e many myths about derivatives but the realities that are differentespecially for ;>change

traded derivatives9 *hich are *ell regulated *ith all the safety mechanisms in place!

:hat are these myths behind derivativesF8erivatives increase speculation and do not serve any economic purposeF5ndian Mar'et is not ready for derivative tradingF8isasters prove that derivatives are very ris'y and highly leveragedinstruments!F8erivatives are comple> and e>otic instruments that 5ndian investors *ill find difficulty

in understanding!

=*> D#$*,!t*,#s *%)$#!s# s"#)(2!t*&% !%' '& %&t s#$,# !%8 #)&%&3*) "($"&s#9

%umerous studies of derivatives activity have led to a broad consensus9 both in the

private and public sectors that derivatives provide numerous and substantial benefits to

the users! 8erivatives are a lo*2cost9 effective method for users to

hedge and manage their e>posures to interest rates9 commodity prices or e>change rates!

(he need for derivatives as hedging tool *as felt first in the

commodities mar'et! ,gricultural futures and options helped farmers and processors

hedge against commodity price ris'! ,fter the fallout of &retton *ood


14/51

agreement9 the financial mar'ets in the *orld started undergoing radical changes!

(his period is mar'ed by remar'able innovations in the financial

mar'ets such as introduction of floating rates for the currencies9 increased trading in

variety of derivatives instruments9 on2line trading in the capital mar'ets9 etc! ,s the

comple>ity of instruments increased many folds9 the accompanying

ris' factors gre* in gigantic proportions! (his situation led to development derivatives as

effective ris' management tools for the mar'et participants! =oo'ing at the equity mar'et9

derivatives allo* corporations and institutional investors to effectively manage their

portfolios of assets and liabilities through instruments li'e stoc' inde> futures and

options! ,n equity fund9 for e>ample9 can reduce its e>posure to the stoc' mar'et quic'ly

and at a relatively lo* cost *ithout selling off part of its equity assets by using stoc'

inde> futures or inde> options! &y providing investors and issuers *ith a *ider array of

tools for managing ris's and raising capital9 derivatives improve the allocation of credit

and the sharing of ris' in the global economy9 lo*ering the cost of capital formation and

stimulating economic gro*th! %o* that *orld mar'ets for trade and finance have become

more integrated9 derivatives have strengthened these important lin'ages bet*een globalmar'ets9 increasing mar'et liquidity and efficiency and facilitating the flo* of trade and

finance=**> I%'*!% M!$/#t *s %&t $#!'8 +&$ '#$*,!t*,# t$!'*%7

Often the argument put forth against derivatives trading is that the 5ndian capital mar'et is

not ready for derivatives trading!


15/51

CHAPTER INDIAN DERIVATIVES MARKET

.1 DERIVATIVES MARKET IN INDIA

Prior to liberaliAation9 in 5ndia financial mar'ets9 there *ere only a fe* financial products and thestringent regulatory products and the stringent regulation environment also eluded any possibilityof development of a derivatives mar'et in country! ,ll 5ndian corporate *ere mainly relying onterm lending institution for meeting their project financing or any other financing requirementsand on commercial ban's for meeting *or'ing capital finance requirement! (he only derivative product they *ere a*are of is the foreign e>change for*ard contract! &ut this scenario changedin the post liberaliAation period! $onservative 5ndian business practitioners began to ta'e a

different vie* of various aspects of their operations to remain competitive! 7inancial ris's *eregiven adequate attention and treasury function has assumed a significance role in all major corporate since then! 5nitially9 ban's *ere allo*ed to pass on gains arising out of cancellation of for*ards contracts to the customers and customers *ere permitted to cancel and re2boo' thefor*ard contracts! (his remar'able change *as follo*ed by the introduction of cross currencyfor*ard contacts! (he R&5’s objective of introducing cross currency options *as to provide acomplicated hedging strategy for the corporate in their ris' management activities! 5n 0H@19 thefirst commodity futures e>change *as set up in Mumbai under the guidance of &ombay $otton(raders ,ssociation! , clearinghouse for clearing and settlement of these traders *as set up in0B0H! Over a period of t*enty years during 0B//20B./9 other futures mar'ets *ere set up in


16/51

various places! :hen it comes to financial mar'ets9 derivatives in equities claim a longe>istence! (he official history of &ombay Stoc' ;>change )then 'no*n as %ative Share andStoc' &ro'ers ,ssociation+ reveals that the concept of options e>isted since 0HBH as is reflectedfrom a quote given by one of the MPs25ndia being the original home of options9 a native bro'er *ould give a fe* points to the bro'ers of the other nations in the manipulation of puts and calls!Go*ever9 such an early e>pertise gained by 5ndian traders in derivatives trading has come to an

end *ith the "overnment of 5ndia’s ban on for*ard contract during the 0B3/’s on the ground of their intrinsic undesirability! &ut ironically9 the same *ere reintroduced by the government in the0BH/’s as essential instruments for eliminating *ide fluctuations in prices and more so because of the :orld &an' U%$(,8 report9 *hich strongly urged the 5ndian government to start futurestrading in major cash crops9 especially in vie* of 5ndia’s entry to :(O!

:ith the *orld embracing the derivative trading on large scale9 the 5ndian mar'et obviously

cannot remain aloof9 especially after liberaliAation has been set in motion! %o* *e are in thethreshold of introducing trading in derivatives9 beginning *ith the stoc' inde> futures to be *ellset for the introduction of derivative trading! :ith =!$! "upta committee having recentlysubmitted its report on the subject9 S;&5 is engaged in the process of assessing the feasibility anddesirability of introducing such trading!

(he %S; and &S; are t*o e>changes on *hich financial derivatives are traded! (he combined

notional value of the daily volumes on both the bourses stands at around RS!01//// cr! 5ndeveloped mar'ets trading in the derivatives segment are thrice as large as in the cash mar'ets! 5n5ndia9 the figure is hardly ./D of cash mar'ets! uite clearly our derivative mar'ets have a long*ay to go!

,ccording to the ;>ecutive 8irector of ,ssociation of %S; Member of 5ndia ),mni+9 Vinod #ain9

Volumes in derivatives segment are stagnating due to lac' of gro*th in the number of mar'ets participants! &esides these products are still to catch up *ith the masses *ho are 'eeping a*ayfrom this segment due to lac' of understanding of the products and high contract price!

A> COMMODITIES DERIVATIVES MARKETS


17/51

5n order to give more thrust on agricultural sector9 the %ational ,gricultural Policy9 ./// hasenvisaged and domestic mar'et reforms and dismantling of all controls and regulations inagricultural commodity mar'ets! 5t has also proposed to e>tend the coverage of futures mar'etsto minimiAe the *ide fluctuations in commodity mar'et prices and for hedging the ris' from price fluctuations!

,s a result of these recommendations9 there are presently9 01 e>changes carrying out futurestrading in as many as ?/ commodity items! Out to these9 t*o e>changes viA! 5PS(,9 $ochin andthe &ombay $ommodity ;>change )&$;+ =td! have been upgraded to international e>changedto deal international contracts in peeper and castor oil respectively! Moreover9 permission has been given to t*o more e>change viA! the 7irst $ommodities ;>change of 5ndia =td!9 ochi )for copraJcoconut9 its oil and oilca'e+9 and eshave $ommodity ;>change =td!9 8elhi )for potato+9*here futures trading started very recently!

(he government has also permitted four e>change viA!9 ;5$,9 Mumbai! (he $entral "ujarat$otton 8ealers ,ssociation9 Vadodara (he South 5ndia cotton ,ssociation $oimbatore and the,hmadabad $otton Merchants ,ssociation9 ,hmadabad9 for conducting for*ard contracts incotton! =ately as part of further liberaliAation of trade in agriculture and dismantling of ;$,90B11 futures trade in sugar has been permitted and three ne* e>changes viA!9 $ommodities=imited9 Mumbai %$S 5nfo(ech =td!9 Gyderabad and ;2Sugar 5ndia!com9 Mumbai have been

given approval for conducting sugar futures!

5n the recent past9 the "O5 has set up a committee to e>plore and appraise matters important tothe establishment and financing of the proposed national commodity e>change for the nation*idetrading of commodity futures contracts! (he "overnment of 5ndia is on the move to establish asystem of *arehouse receipts in other commodity stoc' e>changes at various places of the

country!

&esides these domestic developments9 during 0BBH9 Reserve &an' of 5ndia permitted the 5ndian$orporate Sector to access the e>changes subject to certain conditions *ith a vie* to enabledomestic metal manufacturers to compete *ith global players!


18/51

&rief descriptions of commodity e>changes are those *hich trade in particular commodities9neglecting the trade of securities9 stoc' inde> futures and options etc!

,gricultural commodities *ere mostly traded but as long as there are buyers and sellers9 anycommodity can be traded! 5n 5ndia there are .1 recogniAed future e>changes9 of *hich there arethree national level multi9 "overnment of 5ndia has allo*ed for*ard transactions in commoditiesthrough Online $ommodity ;>changes9 a modification of traditional business 'no*n as ,dhatand Vayda Vyapar to facilitate better ris' coverage and delivery of commodities! (he threee>changes commodities e>changes! ,fter a gap of almost three decades are-

T %ational $ommodity E 8erivatives ;>change =imited )%$8;+

T Multi $ommodity ;>change of 5ndia =imited )M$+

T %ational Multi2$ommodity ;>change of 5ndia =imited )%M$;5=+

,ll the e>changes have been set up under overall control of 7or*ard Mar'et $ommission )7M$+of "overnment of 5ndia!

%ational $ommodity E 8erivatives ;>change =imited )%$8;+


19/51

%ational $ommodity E 8erivatives ;>change =imited )%$8;+ located in Mumbai is a publiclimited company incorporated on ,pril .?9 .//? under the $ompanies ,ct9 0B13 and hadcommenced its operations on 8ecember 019 .//?!(his is the only commodity e>change in thecountry promoted by national level institutions! 5t is promoted by 5$5$5 &an' =imited9 =ife5nsurance $orporation of 5ndia )=5$+9 %ational &an' for ,griculture and Rural 8evelopment)%,&,R8+ and %ational Stoc' ;>change of 5ndia =imited )%S;+! 5t is a professionally

managed online multi commodity e>change! %$8; is regulated by 7or*ard Mar'et$ommission and is subjected to various la*s of the land li'e the $ompanies ,ct9 Stamp ,ct9$ontracts ,ct9 7or*ard $ommission )Regulation+ ,ct and various other legislations!

• Multi $ommodity ;>change of 5ndia =imited )M$+

Geadquartered in Mumbai Multi $ommodity ;>change of 5ndia =imited )M$+9 is an

independent and de2mutualised e>change *ith a permanent recognition from "overnment of

5ndia! ey shareholders of M$ are 7inancial (echnologies )5ndia+ =td!9 State &an' of 5ndia9

Union &an' of 5ndia9 $orporation &an'9 &an' of 5ndia and $anara &an'! M$ facilitates online

trading9 clearing and settlement operations for commodity futures mar'ets across the country!

M$ started offering trade in %ovember .//? and has built strategic alliances *ith &ombay

&ullion ,ssociation9 &ombay Metal ;>change9 Solvent ;>tractors ,ssociation of 5ndia9 Pulses

5mporters ,ssociation and Shet'ari Sanghatana!

• %ational Multi2$ommodity ;>change of 5ndia =imited )%M$;5=+

%ational Multi $ommodity ;>change of 5ndia =imited )%M$;5=+ is the first demutualiAed9

;lectronic Multi2$ommodity ;>change in 5ndia! On .1th #uly9 .//09 it *as granted approval by

the "overnment to organiAe trading in the edible oil comple>! 5t has operationalised from

%ovember .39 .//.! 5t got its recognition in October .//.! $ommodity e>change in 5ndia plays

an important role *here the prices of any commodity are not fi>ed9 in an organiAed *ay! ;arlier

only the buyer of produce and its seller in the mar'et judged upon the prices! Others never had a

say! (oday9 commodity e>changes are purely speculative in nature! &efore discovering the price9

they reach to the producers9 end2users9 and even the retail investors9 at a grassroots level! 5t

brings a price transparency and ris' management in the vital mar'et!

, brief description of commodity e>changes is those *hich trade in particular commodities9

neglecting the trade of securities9 stoc' inde> futures and options etc!


20/51

CURRENCY DERIVATIVES

7oreign e>change derivatives mar'et is one of the oldest derivatives mar'ets in 5ndia! Presently9

5ndia has got a *ell2established dollar2rupee for*ard mar'et *ith contrast traded for one month9

t*o months and three months e>piration! 5ntroduction of cross currency options can be

considered as another major step to*ards developing fore> derivatives mar'ets in 5ndia!

(oday9 5ndian corporate is permitted to purchase cross currency options to hedge e>posures

arising out of trade! ,uthoriAed dealers *ho offer these products have to necessarily cover their

e>posure in international mar'ets i!e!9 they shall not carry the ris' in their o*n boo's! $ross

currency options are essentially meant for buying or selling any foreign currency in terms of US

dollar! (hey are therefore9 useful only to those traders *ho invoice their e>ports and imports incurrencies other than US dollar or for corporate *ho borro* in currencies other than US dollar!

,s against this9 majority of 5ndian trade is invoiced in the US dollars! (hus9 they have almost no

relevance in the 5ndian conte>t!

5ndian ban's are allo*ed to use the foreign currency interest rate s*aps9 for*ard rate

agreementsJinterest rate optionsJs*aps9 and for*ard rate agreementsJinterest rate

optionJs*aptionJcapsJfloors to hedge interest rate and currency mismatch in their balance sheets!

Resident and the non2resident clients are also permitted to use the above products as hedges for liabilities on their balance sheets!

Gere it is *orth remembering that globally9 foreign e>change traders are becoming as common as

stoc' traders! &ut in 5ndia9 fore> dealers still play second fiddle to stoc' traders and merely meet

the needs of the e>porter’s deposits! (his may be due to their ris' averting behavior and perhaps

lac' of proper research! Such being the position of the fore> mar'et9 it is too premature to e>pect

that once9 foreign currency25ndian rupee options are introduced9 the mar'et *ill pic' up

momentum!

(his is all the more essential in a mar'et *here e>change rates though stated to be mar'et

determined9 are often found influenced by R&5’s intervention in the e>change mar'et! ,s a result9

e>change rate movements hardly obey the principle of interest rate differentials! (he

incongruence in the domestic money rates as derived from the US8J5%R for*ards yield curve

supports this assertion! 7or e>ample9 the one2year domestic term money is around 323!.1D


21/51

*hereas that of the one2year implied for*ard rate is around 1!4/D! 5n such a scenario9 it is

difficult for a currency trader to ta'e a firm vie* on the e>change rate movement!

)> STOCK MARKET DERIVATIVES

(oday trading on the spot mar'et for equity in 5ndia has al*ays been a futures mar'et *ith

*ee'lyJfortnightly settlements! (hese mar'ets features the ris's and difficulties of futures

mar'et9 &ut *ithout the gains in price discovery and hedging services that come *ith separation

the spot mar'et from the futures mar'et! 5ndia’s primary mar'et is acquainted *ith t*o types of

derivatives

T $onvertible bonds

T :arrants

,s these *arrants are listed and traded9 it could be said that options mar'et of a limited sort

already e>ist in our mar'et! &esides9 a *ide range of interesting derivatives mar'ets e>ists in the

informal sector! $ontracts such as bhav2bhav teji2mandi etc! are traded in these mar'ets! (hese

informal mar'ets enjoy a very limited participation and have their presence outside the

conventional institutions of 5ndia’s financial system!

(he first step to*ards introduction of derivatives trading in 5ndia in its current format *as the

promulgation of the securities la*s ),mendment+ Ordinance9 0BB1 that *ithdre* the prohibitionon options in securities! (he real push to derivatives mar'et in 5ndia *as ho*ever given by the

S;&5! (he security mar'et *atchdog9 in %ovember 0BB3 by setting up a committee under the

chairmanship of 8r = $ "upta to develop appropriate regulatory frame*or' for derivatives

trading in 5ndia!

5n .///9 S;&5 permitted %S; and &S; to commence trading in inde> futures contracts based on

SEP $% %ifty and &S; ?/)sense>+ inde>! 7utures contracts on 5ndividual stoc's *ere

launched on %ovember B9 .//0! (rading and settlement is done in accordance *ith the rules of

the respective e>changes! &ut the trading volumes *ere initially quite modest! (his could be due

to 22222

5nitially9 fe* members have been permitted by S;&5 to trade on derivatives

755’S9 M7S have been allo*ed to have a very limited participation


22/51

Mandatory requirements for bro'erage firms to have S;&5 approved certification test2passed

bro'ers for underta'ing derivatives trading and

=ac' of clarity on ta>ation and accounting aspects under derivatives trading!

(he current trading behavior in the derivatives segments reveals that single stoc' futures

continues to account for siAeable proportion! S;&5 has permitted trading in options and futures

on individual stoc's9 but not on all the listed stoc's! 5t *as very selective9 stoc's that are said to

be highly volatile *ith a lo* mar'et capitaliAation are not allo*ed for option trading! (his act of

S;&5 is strongly resented by a section of the mar'et! (heir argument is that equity options are

indispensable to investors *ho need to protect their investment from volatility! (he higher the

volatility of a stoc' the more necessary it is to list options on that stoc'!

(oday9 mutual funds are permitted to use equity derivatives products for hedging and portfoliorebalancing! Go*ever9 such usage is not favored by fund managers as they strongly apprehend

that the dividing line bet*een hedging and speculation being thin9 they may al*ays get e>posed

to the questioning by the regulatory authorities!

'> CREDIT DERIVATIVES AND OTHERS

, credit derivative is a financial transaction *hose pay2off depends on *hether or not a credit

event occurs! , credit event can be-

T &an'ruptcy

T 8efault

T Upgrade

T 8o*ngrade

T 5nterest rate movement

T Mortgage defaults

T Unforeseen pay2offs

, credit derivative9 li'e any other derivative9 derives it’s value from an case is the credit! 5n the

event of the underlying asset failing to perform as e>pected9 credit derivatives9 ensures that

someone other than the principal lender absorbs the resulting financial loss!


23/51

$redit derivatives mar'et in 5ndia though could be said as non2e>istent holds huge potential!

Some of the important factorsJsituation such as opening up of the insurance sector to foreign

private players9 relief to investors9 ta> benefits to corporate9 pro>y hedgers etc!9 could provide the

momentum to the credit derivatives mar'et in 5ndia9 boosting yields and bringing do*n ris' for

both the corporate and ban's!

Secondly9 5ndian ban'ing system is saddled *ith huge %P,’s9 *hich it is of course9 eagerly trying

to get rid of! (he mounting pressure on profitability is ma'ing ban's more credit2averse!

. EVOLUTION OF DERIVATIVE IN INDIA

Starting from a controlled economy9 5ndia has moved to*ards a *orld *here prices

fluctuate every day! (he introduction of ris' management instruments in 5ndia gained momentum

in the last fe* years due to liberaliAation process andReserve &an' of 5ndia’s )R&5+ efforts in creating currency for*ard mar'et! 8erivatives are an

integral part of liberaliAation process to manage ris'! %S; gauging the mar'et requirements

initiated the process of setting up derivative mar'ets in 5ndia! 5n #uly 0BBB9 derivatives trading

commenced in 5ndia!

, $hronology of events- 7inancial 8erivatives in 5ndia-

S2. N&. P$&7$#ss D!t# P$&7$#ss &+ F*%!%)*!2 D#$*,!t*,#

0 0B1. ;nactment of the for*ardcontracts )Regulation+ ,ct!

. 0B1? Setting up of the for*ard mar'etcommission!

? 0B13 ;nactment of Securities $ontractRegulation ,ct 0B13

4 0B3B Prohibition of all forms of for*ard trading under section 03

of S$R,!1 0B@. 5nformal carry for*ard trades

bet*een t*o settlement cycles

began on &S;!

3 0BH/ huso $ommittee recommendsreintroduction of futures in most

commodities!@ 0BH? "ovt! amends bye2la*s of

e>change of &ombay9 $alcuttaand ,hmedabad and introduced

carry for*ard tradinginspecified shares!

H 0BB. ;nactment of the S;&5 ,ct!B 0BB? S;&5 Prohibits carry for*ard

transactions!


24/51

0/ 0BB4 abra $ommittee recommendsfutures trading in B commodities!

00 0BB1 "!S! Patel $ommitteerecommends revised carryfor*ard system!

0. 04th 8ec! 0BB1 %S; as'ed S;&5 for permissionto trade inde> futures


25/51

0? 0BB3 Revisedsyste

mrestarte

d on

&S;!

040Hth %ov!

0BB3 S;&5 setup =$ "upta committeeto draft frame *or' for inde>

futures

0100th May

0BBH =$ "upta committee submittedreport

030st #une

0BBB 5nterest rat

es*apsJfor

*ard rat

eagreements allo*ed at &S;

0@@th #uly

0BBB R&5 gave permission to O($ for

interestrat

e

s*apsJfor *ard

rat

eagreements

0H

.4th May

./// S5M; chose %ifty for tradingfutures and options on an 5ndianinde>

0B.1th May

./// S;&5 gave permission to %S; E&S; to do inde> futures trading

./Bth #une

./// ;quity derivatives introduced at&S;

.00.th #une

./// $ommencement of derivati

vestrading )inde> futures+ at %S;

..?0st ,ug!

./// $ommencement o

f trading

futures E options on %ifty atS5M;

.?0st #une

.//0 5nde> option launched at &S;.4 #un .//0 (rading on equity inde> options

at %S;.1 #uly .//0 (rading at stoc' options at %S;

.3Bth #uly

.//0 Stoc' options launched at &S;

.@ #uly .//0 $ommencement of tradi

ng inoptions on individual securities

.H0st %ov!

.//0 Stoc' futures launched at &S;

.B %ov! .//0 $ommencement of trading infutures on individual security

?/Bth %ov!

.//0 (rading of Single stoc' futuresat &S;

?0 #une .//? (rading of 5nterest rate futures at %S;

?. ,ug! .//? =aunch of futures E options in$% 5( inde>

??0?th Sep!

.//4 :ee'ly options of &S;?4 #une .//1 =aunch of futures E options in

&an' %ifty inde>

?1 8ec! .//3 8erivative ;>change of the 6ear by ,sia ris' magaAine

launch derivat


26/51

?@ Oct! .//@ %S;launch

es derivat

ives on %ifty Midcap 21/

?H 0st #an! .//H (rading of $hhota )Mini+ Sense>at &S;

?B 0st #an! .//H (rading of mini inde> futures Eoptions at %S;

4/?rd March

.//B =ong term options contracts onSEP $% %ifty inde>

40 %, 7utures E options on sectoral

indices )&S;

(;$9&S;

7M$"9 &S;Metal

9&S

;

&an'e> E &S; oil E gas+

4..Bth ,ug!

.//H (rading of currency futures at %S;

4? ,ug! .//H =aunch of interest rate futures

440st Oct!

.//H $urrency derivativeintroduc

edat &S;

410/th 8ec!

.//H SEP $% 8efty futures Eoptions at %S;

43 ,ug! .//B =aunch of interest rate futures at %S;

4@@th ,ug!

.//B &S;2US; form alliance todevelop currency E interest rate

derivative mar'ets

4H0Hth 8ec!

.//B &S;sne*

derivativesrate to


27/51

lo*er transaction costs for all4B 7eb! ./0/ =aunch of currency future on

additional currency pairs at %S;1/ ,pr! ./0/ 7inancial derivatives e>change

a*ard of the year by ,sian

&an'er to %S;10 #uly ./0/ $ommencement trading of SEP$% %ifty futures on $M; at

%S;1. Oct! ./0/ 5ntroduction of ;uropean style

stoc' option at %S;1? Oct! ./0/ 5ntroduction of $urrency options

on US8 5%R by %S;14 #uly ./00 $ommencement of B0 day "O5

trading &ill futures by %S;11 ,ug! ./00 =aunch of derivative on "lobal

5ndices at %S;13 Sep! ./00 =aunch of derivative on $%

PS; E $% infrastructure5ndices at %S;

1@?/th March

./0. &S;launche

dtrading in

&R5$SM,R( indicesderivatives

1H.Bth

%ovember &S;launched currency

./0? derivative segment

;>change2traded vs! O($ derivatives mar'ets

(he O($ derivatives mar'ets have *itnessed rather sharp gro*th over the lastfe* years9 *hich have accompanied the moderniAation of commercial andinvestment ban'ing and globalisation of financial activities! (he recent developments in information technology havecontributed to a great e>tent to these developments! :hile both e>change2traded and O($ derivative contracts offer many benefits9 the former have rigid structurescompared to the latter! 5t has been *idely discussed that the highly leveraged institutions and their O($ derivative positions*ere the main cause of turbulence in financial mar'ets in 0BBH! (hese episodes of turbulencerevealed the ris's posed to mar'et stability originating in features of O($ derivative instrumentsand mar'ets! (he O($ derivatives mar'ets have the follo*ing features compared to e>change2traded derivatives-

1. (he management of counter2party )credit+ ris' is decentraliAed and located *ithin individualinstitutions9

. (here are no formal centraliAed limits on individual positions9 leverage9 or margining9

. (here are no formal rules for ris' and burden2sharing9


28/51

5. (here are no formal rules or mechanisms for ensuring mar'et stability andintegrity9 and for safeguarding the collective interests of mar'et participants9 and

0. (he O($ contracts are generally not regulated by a regulatory authorityand the e>change’s selfregulatory organiAation9 although they areaffected indirectly by national legal systems9 ban'ing supervision and mar'et surveillance! Some of the features of O($derivatives mar'ets embody ris's to financial mar'et stability!

. FACTORS CONTRIBUTING TO THE GROWTH OF DERIVATIVES9

7actors contributing to the e>plosive gro*th of derivatives are price volatility9 globaliAation of the mar'ets9 technological developments and advances in the financial theories!

,! PR5$; VO=,(5=5(6 change rate! Prices are generally determined by mar'et forces! 5n a mar'et9consumers have Idemand’ and producers or suppliers have Isupply’9 and the collectiveinteraction of demand and supply in the mar'et determines the price! (hese factors are constantlyinteracting in the mar'et causing changes in the price over a short period of time! Such changesin the price are 'no*n as Iprice volatility’! (his has three factors- the speed of price changes9 thefrequency of price changes and the magnitude of price changes! (he changes in demand andsupply influencing factors culminate in mar'et adjustments through price changes! (hese pricechanges e>pose individuals9 producing firms and governments to significant ris's! (he brea'do*n of the &R;((O% :OO8S agreement brought an end to the stabiliAing role of fi>ed

e>change rates and the gold convertibility of the dollars! (he globaliAation of the mar'etsand rapid industrialiAation of many underdeveloped countries brought ane* scale and dimensionto the mar'ets! %ations that *ere poor suddenly became a major source of supply of goods! (heMe>ican crisis in the south east2,sian currency crisis of 0BB/’s has also brought the pricevolatility factor on the surface! (he advent of telecommunication and data processing boughtinformation very quic'ly to the mar'ets! 5nformation *hich *ould have ta'en months to impactthe mar'et earlier can no* be obtained in matter of moments! ;ven equity holders are e>posed to price ris' of corporate share fluctuates rapidly! (hese price volatility ris's pushed the use of derivatives li'e futures and options increasingly as these instruments can be usedas hedge to protect againstadverse price changes in commodity9 foreign e>change9 equity sharesand bonds!

&! "=O&,=5S,(5O% O7 M,R;(S t9 south ;ast ,sian currencies


29/51

crisis of 0BB@ had affected the competitiveness of our products vis2W2vis depreciated currencies! ;>port of certain goods from 5ndia declined because of this crisis!Steel industry in 0BBH suffered its *orst set bac' due to cheap import of steel from south ;ast,sian countries! Suddenly blue chip companies had turned in to red! (he fear of china devaluingits currency created instability in 5ndian e>ports! (hus9 it is evident that globaliAation of

industrial and financial activities necessitates use of derivatives to guard against future losses!(his factor alone has contributed to the gro*th of derivatives to a significant e>tent!

$! (;$G%O=O"5$,= ,8V,%$;S poses producers and consumers togreater price ris'! (he effect of this ris' can easily destroy a business *hich is other*ise *ellmanaged! 8erivatives can help a firm manage the price ris' inherent inamar'et economy! (o the e>tent the technological developments increase volatility9 derivativesand ris' management products become that much more important!

8! ,8V,%$;S 5% 75%,%$5,= (G;OR5;S tended the early *or' of #ohnson and started the hedging of financial priceris's *ith financial futures! (he *or' of economic theorists gave rise to ne* products for ris' management *hich led to the gro*th of derivatives in financial mar'ets! (he above factors incombination of lot many factors led to gro*th of derivatives instruments!


30/51

CHAPTER

DEVELOPMENT OF DERIVATIVES MARKET IN INDIA

(he first step to*ards introduction of derivatives trading in 5ndia *as the promulgation of the Securities =a*s ),mendment+ Ordinance9 0BB19 *hich *ithdre* the prohibition on options in securities! (he mar'et for derivatives9 ho*ever9 did not ta'e off9 asthere *as no regulatory frame*or' to govern trading of derivatives! S;&5 set up a .4


31/51

F On relative terms9 volumes in the inde> options segment continue to remain poor! (his may bedue to the lo* volatility of the spot inde>! (ypically9 options are considered more valuable *henthe volatility of the underlying )in this case9 the inde>+ is high! , related issueis that bro'ers do not earn highcommissions by recommending inde> options to their clients9 because lo* volatility leads to higher *aiting time for round2trips!

F Put volumes in the inde> options and equity options segment have increased since #anuary.//.! (he call2put volumes in inde> options have decreased from .!H3 in #anuary .//. to 0!?. in#une! (he fall in call2put volumes ratio suggests that the traders are increasingly becoming pessimistic on the mar'et!

F 7arther month futures contracts are still not actively traded! (rading inequity options on moststoc's for even the ne>t month *as non2e>istent!

F 8aily option price variations suggest that traders use the 7EO segment asa less ris'y alternative)read substitute+ to generate profits from the stoc' pricemovements! (he fact that the option premiums tail intra2day stoc' prices is evidence to this! 5f

calls and puts are not loo'ed as just substitutes for spot trading9 the intra2day stoc' price variations should not have a one2to2one impact on the option premiums!

F(he spot foreign e>change mar'et remains the most important segment but thederivative segment has also gro*n! 5n the derivative mar'et foreign e>change s*aps account for the largest share of the total turnover of derivatives in 5ndia follo*ed by for*ards andoptions! Significant milestones in the development of derivatives mar'et have been

)i+ permission to ban's to underta'e cross currency derivative transactions subject to certainconditions )0BB3+

)ii+ allo*ing corporate to underta'e long term foreign currency s*apsthat contributed to the development of the term currency s*ap mar'et)0BB@+

)iii+ allo*ing dollar rupee options ).//?+ and)iv+ 5ntroduction of currency futures ).//H+!

5 *ould li'e to emphasiAe that currency s*aps allo*ed companies *ith ;$&sto s*ap their foreign currency liabilities into rupees! Go*ever9 since ban's couldnot carry open positions the ris' *as allo*ed to be transferred to any other residentcorporate! %ormally such ris's should be ta'en by corporate *ho have natural hedge or have potential foreign e>change earnings! &ut often corporate assume these ris's due tointerest rate differentials and vie*s on currencies! (his period has also *itnessed severalrela>ations in regulations relating to fore> mar'ets and also greater liberaliAation incapital account regulations leading to greater integration *ith the global economy!

F$ash settled e>change traded currency futures have made foreign currency a separate asset classthat can be traded *ithout any underlying need or e>posure and on a leveraged basis on therecogniAed stoc' e>changes *ith credit ris's being assumed by the central counterparty Sincethe commencement of trading of currency futures in all the three e>changes9 the value of thetrades has gone up steadily from Rs 0@9 4.Bcrores in October .//H to Rs 419 H/? crores in8ecember .//H! (he average daily turnover in all the e>changes has also increased from RsH@0crores to Rs .90H0 crores during the same period! (he turnover in the currency futures mar'et is


32/51

in line *ith the international scenario9 *here 5 understand the share of futures mar'et ranges bet*een . < ? per cent!

R;"U=,(5O% O7 8;R5V,(5V;S (R,85%" 5% 5%85,

(he regulatory frame *or' in 5ndia is based on =!$! "upta $ommittee report and #!R! Varma

$ommittee report! 5t is mostly consistent *ith the international organiAation of securitiescommission )5US$O+! (he =!$! "upta $ommittee report provides a perspective on division of regulatory responsibility bet*een the e>change and S;&5! 5t recommends that S;&5Xs roleshould be restricted to approving rules9 bye la*s and regulations of a derivatives e>change asalso to approving the proposed derivatives contracts before commencement of their trading! 5temphasiAes the supervisory and advisory role of S;&5! 5t also suggests establishment of aseparate clearing corporation!

5n 5ndia9 there are t*o major mar'ets namely %ational Stoc' ;>change )%S;+ and &ombayStoc' ;>change )&S;+ along *ith other ;>changes of 5ndia are the mar'et for derivatives! Gere*e may discuss the performance of derivatives products in 5ndian mar'et!

.1 DERIVATIVE PRODUCTS TRADED AT BSE

(he &S; started derivatives trading on #une B9 ./// *hen it launched K;quity derivatives )5nde>futures2S;%S;+ first time! 5t *as follo*ed by launching various products *hich are sho*n intable no!.! (hey are inde> options9 stoc' options9 single stoc' futures9 *ee'ly options9 stoc's for-Satyam9 S&59 Reliance 5ndustries9 (ata Steel9 $hhota )Mini+ S;%S;9 $urrency futures9 USdollar2rupee future and &R5$SM,R( indices derivatives! (he table belo* summarily specifiesthe derivative products and their date of introduction at &S;!

Sl! %o! 8ate of 8erivatives products

commencement

0Bth #une.///

;quity

derivatives

)5nde>

futures 2S;%S;+

. 0st #une.//0 5nde> Options < SEP$%

%ifty

?Bth #uly.//0

Stoc'

optionslaunched

)Stoc'


33/51

option on 0/Bstoc's+

4Bth %ov!.//.

Stoc'

futureslaunched

)Stoc'

futures on 0/BStoc's+

10?th Sep!.//4

:ee'ly options on 4Stoc's

30st #an!.//H

$hhota )mini+S;%S;

@ %,7utures

options on

sector al

indices

)namely

&S;

(;$9

&S; 7M$"9 &S;metal9 &S;

&an'e> E &S; oil Egas+

H0st Oct!.//H

$urrency

derivativeintroduced

)currency futures onUS 8ollar+

B?/th March./0.

=aunched&R5$SM,R( indices

derivatives

. DERIVATIVE PRODUCTS TRADED AT NSE

(he %S; started derivatives trading on #une 0.9 ./// *hen it launched K5nde> 7utures S E P$% %iftyL first time! 5t *as follo*ed by launching various derivative products *hich aresho*n in table no!?! (hey are inde> options9 stoc' options9 stoc' future9 interest rate9 future $%5( future and options9 &an' %ifty futures and options9 $% %ifty #unior futures and options9$%0// futures and options9 %ifty Mid $ap21/ future and options9 Mini inde> futures and


34/51

options9 =ong term options! $urrency futures on US82rupee9 8efty future and options9 interestrate futures9 SP $% %ifty futures on $M;9 ;uropean style stoc' options9 currency options onUS8 5%R9 B0 days "O5 (!&! futures9 and derivative global indices and infrastructures indices!(he table belo* presents a description of the types of derivative product traded at %S; and their data of introduction at %S;!

Sl! %o!5ntroductiondate

8erivativeProducts

0 0.th #une .///5nde> futures <

SEP $% %ifty

. 4th #une .//05nde>

Options


35/51

' y s

Eoptions

H 0st #une .//@

$%

%ift

y #unior

7utures EOptions

B 0st #une .//@$% 0//futures E

options

0/ 1th Oct! .//@ %iftymidcap

futures

Eoptions <

SEP

$% %ifty5nde>

0.?rd March.//H

=ong

ter m

options

contracts on

0?.Bth ,ug!.//H

$urrencyfutures on

US 8ollar Rupee

04 0/th 8ec! .//HSEP$% 8efty

7utures E


36/51

options

01 ,ug! .//B=aunchof

5nterest

rate

futures

03 7eb! .//B=aunch of currency

futures on

additionalcurrency

pair

0@ #uly ./0/ SEP$% %ifty

futures on$M;

0H Oct! ./0/5ntroduction of

;uropean

style

stoc' options

0B Oct! ./0/5ntroduction of

$urrency

options

on US85%R

./ #uly ./00 startB0day

"O5

(reasury&ill2

futures


37/51

.0 ,ug! ./00 =aunch of

derivatives on

global

indices

.. Sep! ./00 =aunch of

derivatives on$%

PS; E $%

5nfrastructure

indices


38/51

CHAPTER 5

PRESENT STATUS OF INDIAN DERIVATIVES MARKET

(he %S; and &S; are t*o major 5ndian mar'ets have sho*n a remar'able gro*th bothin terms of volumes and numbers of traded contracts! 5ntroduction of derivatives trading in .///9

in 5ndian mar'ets *as the starting of equity derivative mar'et *hich has registered on e>plosivegro*th and is e>pected to continue the same in the years to come! %S; alone accounts BBD of the derivatives trading in 5ndian mar'ets! 5ntroduction of derivatives has been *ell received bystoc' mar'et players! 8erivatives trading gained popularity after its introduction in very shorttime!

5f *e compare the business gro*th of %S; and &S; in terms of number of contractstraded and volumes in all product categories *ith the help of table no!49 table no!1 and tableno!0. *hich sho*s the %S; traded 3?30?.B1@ total contracts *hose total turnover isRs!03H/@@H.!.. cr in the year ./0.20? in futures and options segment *hile in currencysegment in 4H?.0.013 total contracts have traded *hose total turnover is Rs!.3114@4!.3 cr in

same year!

5n case of &S; the total numbers of contracts traded are 01//3H01@ *hose total turnover is Rs!?HH4?@/!B3 $r in the year ./0.20? for all segments! 5n the above case *e can say that the performance of &S; is not encouraging both in terms of volumes and numbers of contractstraded in all product categories! (he follo*ing tables summarily specifies the updated figuressince .//?2/4 to ./0.20? about number of contracts traded and total volumes in all segments!

6ear (otal %o! of $ontracts

(otal (urnover )Rs! $r!+

,verage 8aily(urnover )Rs! $r!+

./0?2

./04 B0000HB3? .3444H/4!H3 01111@!3H

./0.2

./0? 00?043@40H ?01??//?!B3 0.33?H!1@

./002

./0. 0./1/41434 ?0?4B@?0!@4 0.1B/.!14

./0/2

./00 0/?4.0./3. .B.4H..0!/B 00101/!4H

.//B2

./0/ [email protected]?B.. 0@33?334!1@ @.?B.!/@

.//H2

.//B 31@?B/4B@ 00/0/4H.!./ 41?0/!3?

.//@2

.//H 4.1/0?.// 0?/B/4@@!@1 1.01?!?/

.//32

.//@ .03HH?1@? @?13.4. .B14?

.//12

.//3 01@30B.@0 4H.40@4 0B../


39/51

.//42

.//1 @@/0@0H1 .143BH. 0/0/@

.//?2

.//4 13HH3@@3 .0?/30/ H?HH

.//.2

.//? 03@3HB/B 4?BH3. 0@1.

.//02

.//. 40B3H@? 0/0B.3 40/

.///2

.//0 B/1H/ .?31 00

Source- $ompiled from %S; *ebsite!

&usiness gro*th of %S; in $8 Segment

6ear (otal %umber of $ontracts

(otal (urnover )Rs! $rs+

,verage 8aily(urnover )Rs! $rs+

./0?2

./04 149HH94H9?B0 ?.9B494/H!31 0B9@.@!//

./0.2

./0? B19B.94?944H 1.9@49434!31 .09@/1!3.

./002

./0. B@9??94490?. 439@49BHB!B0 0B94@B!0.

./0/2

./00 @49B39/.9/@1 ?494B9@H@!@. 0?9H14!1@

.//B2

./0/ ?@9H39/39BH? [email protected]/H!/4 @94.@!1?

.//H2

.//B [email protected]@3H 093.9.@.!4? 0903@!4?

Source- $ompiled from %S; *ebsite!


40/51

Product *ise turnover at %S;

5nde>7utures Stoc' Returns

5nde>

Options

Stoc'

Options (otal ,verage

%otional %otional 8aily6ear (urnover (urnover (urnover

(urnover (urnover (urnover ) cr!+ ) cr!+ ) cr!+

) cr!+ ) cr!+ ) cr!+

./0?204 .0@3?04!.3 ?./?00.!0H0B43.3?1!H103/.@4.!3..3444H/4!H3 01111@!3H

./0.20? .1.@0?/!@34..?H@.!/. ..@H01@4!04 .///4.@!.B

?01??//?!B3 0.33?H!1@

./0020. ?1@@BBH!404/@43@/!@? ..@.//?0!34 B@@/?0!0?

?0?4B@?0!@4 0.1B/.!14

./0/200 4?13@14!1?14B1@13!@/ 0H?31?31!@3 0/?/?44!.0

.B.4H..0!/B 00101/!4H

.//B20/ [email protected]!34 H/.@B34!./ 1/3/31!0H

0@33?334!1@ @.?B.!/@

.//H2/B ?1@/000!4/?4@B34.!0. ?@?01/0!H4 ..B..3!H0

00/0/4H.!./ 41?0/!3?

.//@2/H ?H./33@!.@@14H13?!.? 0?3.00/!HH ?1B0?3!11

0?/B/4@@!@1 1.01?!?/

.//32/@ .1?B1@4 ?H?/B3@ @B0B/3 0B?@B1 @?13.4. .B14?

.//12/3 010?@11 .@B03B@ ??H43B 0H/.1? 4H.40@4 0B../

.//42/1 @@.04@ 04H4/13 0.0B4? 03HH?3 .143BH. 0/0/@

.//?2/4 114443 0?/1B?B 1.H03 .0@./@ .0?/30/ H?HH

.//.2/? 4?B1. .H31?? B.43 0//0?0 4?BH3. 0@1.

.//02/. .04H? 10101 ?@31 .103? 0/0B.3 40/

.///2/0 .?31 2 2 2 .?31 00

Source- $ompiled from %S; *ebsite

http://www.nseindia.com/content/fo/fo_busgrow2013-14.htmhttp://www.nseindia.com/content/fo/fo_busgrow2012-13.htmhttp://www.nseindia.com/content/fo/fo_busgrow2011-12.htmhttp://www.nseindia.com/content/fo/fo_busgrow2010-11.htmhttp://www.nseindia.com/content/fo/fo_busgrow2009-10.htmhttp://www.nseindia.com/content/fo/fo_busgrow2008-09.htmhttp://www.nseindia.com/content/fo/fo_busgrow2007-08.htmhttp://www.nseindia.com/content/fo/fo_busgrow2006-07.htmhttp://www.nseindia.com/content/fo/fo_busgrow2005-06.htmhttp://www.nseindia.com/content/fo/fo_busgrow2004-05.htmhttp://www.nseindia.com/content/fo/fo_busgrow2003-04.htmhttp://www.nseindia.com/content/fo/fo_busgrow2002-03.htmhttp://www.nseindia.com/content/fo/fo_busgrow2001-02.htmhttp://www.nseindia.com/content/fo/fo_busgrow2000-01.htmhttp://www.nseindia.com/content/fo/fo_busgrow2012-13.htmhttp://www.nseindia.com/content/fo/fo_busgrow2011-12.htmhttp://www.nseindia.com/content/fo/fo_busgrow2010-11.htmhttp://www.nseindia.com/content/fo/fo_busgrow2009-10.htmhttp://www.nseindia.com/content/fo/fo_busgrow2008-09.htmhttp://www.nseindia.com/content/fo/fo_busgrow2007-08.htmhttp://www.nseindia.com/content/fo/fo_busgrow2006-07.htmhttp://www.nseindia.com/content/fo/fo_busgrow2005-06.htmhttp://www.nseindia.com/content/fo/fo_busgrow2004-05.htmhttp://www.nseindia.com/content/fo/fo_busgrow2003-04.htmhttp://www.nseindia.com/content/fo/fo_busgrow2002-03.htmhttp://www.nseindia.com/content/fo/fo_busgrow2001-02.htmhttp://www.nseindia.com/content/fo/fo_busgrow2000-01.htmhttp://www.nseindia.com/content/fo/fo_busgrow2013-14.htm


41/51

Product *ise (urnover of $8 Segment at %S;

C($$#%)8

F(t($#s

C($$#%)8

O"t*&%s

T&t!2 T($%&,#$

A,#$!7#

D!*28

Y#!$ T($%&,#$

N&t*&%!2

T($%&,#$ T($%&,#$= )$.>

= )$.> = )$.> = )$.>

./0?2./04 .?9339HH.!04 [email protected]!10 ?.9B494/H!31 0B9@.@!//

./0.2./0? ?@93190/1!?? 019/B9?1B!?. 1.9@49434!31 .09@/1!3.

./002./0. ??9@H94HH!B. 0.9B391//!BH 439@49BHB!B0 0B94@B!0.

./0/2./00 ?.9@B9//.!0? 09@/9@H1!1B ?494B9@H@!@. 0?9H14!1@

.//B2./0/ [email protected]/H!/4 2 [email protected]/H!/4 @94.@!1?

.//H2.//B 093.9.@.!4? 2 093.9.@.!4? 0903@!4?

%umber of $ontract traded at %S; in 7O Segment

5nde>7utures

Stoc' 7utures

5nde>Options Stoc'

(otal %o! of 6ear %o! of %o! of %o! of

Options %o!

contractscontracts contracts contracts

of contracts

./0?204 @11?@?1. 0033@3H14 33?/??/./ 11H@0@?@ B0000HB3?

./0.20? B30//?H1 04@@003B0 H./H@@04B 33@@H0B? 00?043@40H

./0020. 0430HH@4/ 01H?4430@ H34/0@@?3 ?34B4?@0 0./1/41434

./0/200 031/.?31? 0H3/4041B 31/3?H11@ ?.1/H?B? 0/?4.0./3.

.//B20/ 0@H?/3HHB 0411B0.4/ ?40?@B1.? 04/03.@/ [email protected]?B..

.//H2/B .0/4.H0/? ..01@@BH/ .0./HH444 0?.B1B@/ 31@?B/4B@

.//@2/H 0131BH1@B ./?1H@B1. 11?33/?H B43/3?0 4.1/0?.//



42/51

.//32/@ [email protected] 0/4B114/0 .101@4?H 1.H??0/ .03HH?1@?

.//12/3 1H1?@HH3 H/B/14B? 0.B?1003 1.4/@@3 01@30B.@0

.//42/1 .03?144B 4@/4?/33 ?.B?11H 1/4100. @@/0@0H1

.//?2/4 0@0B033H ?.?3HH4. 0@?.404 11H?/@0 13HH3@@3

.//.2/? .0.3@3? 0/3@3H4? 44..40 ?1.?/3. 03@3HB/B

.//02

/. 0/.11HH 0B1@H13 0@1B// 0/[email protected] 40B3H@?

.///2/0 B/1H/ 2 2 2 B/1H/

Source- $ompiled from %S; :ebsite

%umber of $ontract traded at %S; in $8 Segment

Y#!$

C($$#%)8

F(t($#s N&.

C($$#%)8

O"t*&%s T&t!2 N&. &+

&+ )&%t$!)ts

N&. &+

)&%t$!)ts )&%t$!)ts./0?2./04 ?B9//91.90?/ [email protected] 149HH94H9?B0

./0.2./0? 3H94091B9.3? .@91/9H490H1 B19B.94?944H

./002

./0. @/90?9@09B@4 .@[email protected] B@9??94490?.

./0/2

./00 @09.09H09B.H ?9@49./904@ @49B39/.9/@1

.//B2

./0/ ?@9H39/39BH? 2 ?@9H39/39BH?

.//H2

.//B [email protected]@3H 2 [email protected]@3H




43/51

,verage daily transaction at %S; in 7O Segment

Y#!$

T&t!2

N&. &+

T&t!2

T($%&,#$

A,#$!7#

D!*28

)&%t

$!)ts )cr!+

T($%&,#$

=Rs.C$>

./[email protected]?3.? ?H/?43H/!?/ 0101?.!1B

./0.20?00?043@40H ?01??//?!B3 0.33?H!1@

./0020.0./1/41434 ?0?4B@?0!@4 0.1B/.!14

./0/2000/?4.0./3. .B.4H..0!/B 00101/!4H

.//B20/[email protected]?B.. 0@33?334!1@ @.?B.!/@

.//H2/B31@?B/4B@ 00/0/4H.!./ 41?0/!3?

.//@2/H4.1/0?.// 0?/B/4@@!@1 1.01?!?/

.//32/@.03HH?1@?

@?13.4. .B14?

.//12/301@30B.@0

4H.40@4 0B../

.//42/1 @@/0@0H1 .143BH. 0/0/@

.//?2/4 13HH3@@3.0?/30/ H?HH

Source- $ompiled from %S; *ebsite

,verage 8aily transaction at %S; in $8 Segment

T&t!2

A,#$!7#

T&t!2

N&. &+ D!*28

Y#!$

T($%&

,#$)&%t$!)

ts

T($%&,#

$= )$.>

=Rs. C$.>./0?2./04

4@9H?9/091@B

.B94/9HH1!B.

039444!@?

./0.2

./0?3H94091B9.3?

?@93190/1!??

.09@/1!3

.

./002 @/90?9@09 ??9@H94H 0B94@B!0

http://www.nseindia.com/content/fo/fo_busgrow2013-14.htmhttp://www.nseindia.com/content/fo/fo_busgrow2012-13.htmhttp://www.nseindia.com/content/fo/fo_busgrow2011-12.htmhttp://www.nseindia.com/content/fo/fo_busgrow2010-11.htmhttp://www.nseindia.com/content/fo/fo_busgrow2009-10.htmhttp://www.nseindia.com/content/fo/fo_busgrow2008-09.htmhttp://www.nseindia.com/content/fo/fo_busgrow2007-08.htmhttp://www.nseindia.com/content/fo/fo_busgrow2006-07.htmhttp://www.nseindia.com/content/fo/fo_busgrow2005-06.htmhttp://www.nseindia.com/content/fo/fo_busgrow2004-05.htmhttp://www.nseindia.com/content/fo/fo_busgrow2003-04.htmhttp://www.nseindia.com/content/fo/fo_busgrow2013-14.htmhttp://www.nseindia.com/content/fo/fo_busgrow2012-13.htmhttp://www.nseindia.com/content/fo/fo_busgrow2011-12.htmhttp://www.nseindia.com/content/fo/fo_busgrow2010-11.htmhttp://www.nseindia.com/content/fo/fo_busgrow2009-10.htmhttp://www.nseindia.com/content/fo/fo_busgrow2008-09.htmhttp://www.nseindia.com/content/fo/fo_busgrow2007-08.htmhttp://www.nseindia.com/content/fo/fo_busgrow2006-07.htmhttp://www.nseindia.com/content/fo/fo_busgrow2005-06.htmhttp://www.nseindia.com/content/fo/fo_busgrow2004-05.htmhttp://www.nseindia.com/content/fo/fo_busgrow2003-04.htm


44/51

./0. B@4 H!B. .

./0/2

./[email protected]

?.9@B9//.!0?

0?9H14!1@

.//B2

./0/?@9H39/39BH?

[email protected]/H!/4 @94.@!1?

.//H2

.//[email protected]@3H

093.9.@.!4? 0903@!4?


&usiness gro*th at &S; in all segments

(otal(urnover

,verage8aily (rading

6ear

(otal $ontracts

(urnover )Rs

)Rs$r+ 8ays

$r+

./0?204 @1/?4/1 0B4.0H14!H ?/H.H?!4 .4@

./0.20? 01//3H01@

?HH4?@/!B3 ?/H.H!?4 .40

./0020. ?....H.1

H/H4@1!BB ?.43!HB .4B

./0/200 13.? 014!?? /!30 .11

.//B20/ B/.H .?4!/3 0!/4 ..4

.//H2/B

4B31/. 00@@4!H? 4H!43 .4?

.//@2/H

@41??@0

.4.?/H!40 B31!?@ .10


45/51

.//32/@

0@H0../ 1B//3!3. .1B!B4 ..@

.//12/3 ./? H!@H /!04 30

.//42/1 1?0@0B 0300.!?. @@!/B ./B

.//?2/4 04?..4 1/.0!H0 H0!// 3.

Source- $ompiled from &S; :ebsite

Product *ise turnover of futures at &S;

Y#!$ I%'#?

E@(*t

8 T$!'*%7

F(t($#

s

F(t($

#s D!8sT($%&

,#$

T($%&

,#$

=Rs

C$>

=Rs.

C$.>

./0?204

.0134@!@H

?.13/!H/ .4@

./0.20?

0B40HH!31

.0?B/!3/ .40

./0020.

0@H44H!H?

0/.01!@/ .4B

./0/200 014!/H /!// .11

.//B20/

B3!// /!?/ ..4

.//H2/B 00@1@!.. H!4B .4?

.//@2/H

.?433/!03

@3/B!.4 .10

.//32/@

114B/!H3

?101!1/ ..@

.//12

/3 1!// /!4B 30

.//42/1 0?1BB!33 .0.!H1 ./B

.//?2/4 ?/H.!3? 03H/!?4 3.



46/51

Product *ise turnover of option at &S;

I%'#?

&"t*&%

I%'#?

O"t*&%

E@(*t

8 E@(*t8

O"t*&%

C!22 &"t*&% P(tY#!$

C!22T($%&,#$

P(tT($%&,#$ T$!'*%7 '!8s

T($%&,#$ T($%&,#$

=Rs. C$.>

=Rs.

C$.> =Rs.

C$.> =Rs. C$.>

./0?2040@3H/H@.!.? B/3?@B0!H1 04H@!BH .BH!14 .4@

./0.20? 0B3@/B0!.? 0H0.@1H!?@ 0?3@!H@ .41!?. .40

./0020. .///HB!1@ 40H.1.!@B 0.@@!.@ 0B0!H. .4B

./0/200 /!// /!.1 /!// /!// .11

.//B20/ 0?@!@3 /!// /!// /!// ..4.//H2/B 3!00 ?!/0 /!// /!// .4?

.//@2/H ?0!// @!33 /!.0 /!04 .10

.//32/@ /!/3 /!// /!03 /!/4 ..@

.//12/3 ?!./ /!// /!/B /!// 30

.//42/1 04@/!30 H.3!3. .!/H /!1/ ./B

.//?2/4 /!// /!// 0?B!/@ 00B!@@ 3.


%umber of contracts traded at &S; in 7uture segment

I%'#?

F(t($#s

E@(*t8

Y#!$F(t($#s

T$!'*%7D!8sC&%t$!)

ts C&%t$!

)ts

./0?204 4.44///4 0B1H/1. .4@

./0.20? 0404333H 31.3H4 .40

./0020. @/@???4 ?.3?4. .4B

./0/200 130? / .11

.//B20/ ?@44 H ..4

.//H2/B 4B1H?/ .BB .4?

.//@2/H @01@/@H .B100@ .10

.//32/@ 03?H@@B 04.4?? ..@

.//12/3 HB 0. 30

.//42/1 443?/ [email protected] ./B

.//?2/4 0/?@@@ ??4?@ 3.



47/51

%umber of contracts traded at &S; in Options Segment

Y#!$

I%'#? O"t*&%s

C!22

I%'#? O"t*&%s

P(t

E@(*t8 O"t*&%s

C!22

E@(*t8 O"t*&%s

P(t T$!'*%7

C&%t$!)ts C&%t$!)ts C&%t$!)ts C&%t$!)ts D!8s

./0?204 .H?H@43@ .@H4@43HB 14.1 ?B1H4 .4@

./0.20? 0440?/.H 04?/44?HH ?4BH 01?04 .40

./0020. @./3104 0@13B0?/ ?BH4H @31@ .4B

./0/200 / 0/ / / .11

.//B20/ 1.@3 / / / ..4

.//H2/B .10 0.. / / .4?

.//@2/H B10 .0/ B 3 .10

.//32/@ . / 1 0 ..@

.//12/3 0// / . / 30

.//42/1 4H/31 [email protected]/ @. 0@ ./B

.//?2/4 / / ?433 .144 3.


,verage 8aily (urnover at &S; in all segments

.//32/@ 0@H0../ 1B//3!3. .1B!B4 ..@

.//12/3 ./? H!@H /!04 30

.//42/1 1?0@0B 0300.!?. @@!/B ./B

.//?2/4 04?..4 1/.0!H0 H0!// 3.

Source- $ompiled fro

Date post:	08-Jul-2018
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