Page 29 - DCOM510_FINANCIAL_DERIVATIVES

Financial Derivatives

Notes can be placed on the system. Various conditions like immediate or Cancel, Limit/Market price,
Stop loss, etc. can be built into an order. The Clearing Members (CM) uses the trader workstation
for the purpose of monitoring the trading member(s) for whom they clear the trades.
Additionally, they can enter and set limits to positions, which a trading member can take.

Did u know? Exchanges in Asia grew especially rapidly in 2010, with growth rates of 42.8
percent, accounting for 39.8 percent of the global volume, compared to 32.2 percent for
North America and 19.8 percent for Europe. Most of the increase in volume came from
exchanges in China, India, and Korea. In India, the growth story was driven mainly by
financial contracts, foreign exchange contracts in particular. In 2010, the dollar-rupee contract
traded on the MCX-SX had a volume of 821.3 million contracts, making it the second most
actively traded contract across all derivatives exchanges in the world. One of the most
interesting stories in the Asia-Pacific region is the growth of equity index futures and
options. These products are traded all across the regions, with some being relatively new
to the market and others being very well-established.

Self Assessment

State whether the following statements are true or false:
4. NSE was the, first stock exchange in the country to provide nation-wide order-driven,
screen-based trading system.

5. National Exchange for Automated Trading (NEAT) system is an anonymous order-driven
system and operates on a strict volume/time priority.
6. The Trading Members (TM) have access to functions such as order entry, order matching,
order and trade management.

2.3 BSE – Start of Derivative Trading

BSE created history on June 9, 2000 by launching the first Exchange-traded Index Derivative
Contract i.e. futures on the capital market benchmark index - the BSE Sensex. The inauguration
of trading was done by Prof. J.R. Varma, member of SEBI and Chairman of the committee which
formulated the risk containment measures for the derivatives market. The first historical trade
of 5 contracts of June series was done that day between the Members Kaji & Maulik Securities
Pvt. Ltd. and Emkay Share & Stock Brokers Ltd. at the rate of 4755.
In sequence of product innovation, BSE commenced trading in Index Options on Sensex on June
1, 2001, Stock Options were introduced on 31 stocks on July 9, 2001 and Single Stock Futures were
launched on November 9, 2002.
September 13, 2004 marked another milestone in the history of the Indian capital market, when
BSE launched Weekly Options, a unique product unparalleled worldwide in the derivatives
markets. BSE permitted trading in weekly contracts in options in the shares of four leading
companies namely Reliance Industries, Satyam, State Bank of India, and TISCO (now Tata Steel)
in addition to the flagship index-Sensex.

Chhota SENSEX was launched on January 1, 2008. With a small or ‘mini’ market lot of 5, it allows
for comparatively lower capital outlay, lower trading costs, more precise hedging and flexible
trading. It is a step to encourage and enable small investors to mitigate risk and enable easy
access to India’s most popular index, SENSEX, through futures & options. The Security Symbol
for SENSEX Mini Contracts is MSX. The contract is available for one, two and three months
along with weekly options.

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