Page 17 - DMGT513_DERIVATIVES_AND_RISK_MANAGEMENT

Derivatives & Risk Management Rupesh Roshan Singh, Lovely Professional University

Notes Unit 2: Evolution of Derivatives in India

CONTENTS
Objectives
Introduction
2.1 Derivatives in India

2.2 Regulations for Derivatives Trading
2.2.1 SEBI Act 1992
2.2.2 Government Securities Act (GSA) 2006

2.3 Traders in Derivative Markets
2.4 SEBI Guidelines Related to Derivative Trade
2.5 Summary
2.6 Keywords
2.7 Review Questions

2.8 Further Readings

Objectives

After studying this unit, you will be able to:
 Discuss the evolution of derivatives in India

 Know the regulation of derivatives trading in India
 Describe the SEBI guidelines related to derivative trade

Introduction

The most notable of development in the history of secondary segment of the Indian stock
market is the commencement of derivatives trading in June, 2000. The SEBI approved derivatives
trading based on futures contracts at National Stock Exchange (NSE) and Bombay Stock Exchange
(BSE) in accordance with the rules/bye-laws and regulations of the stock exchanges. To begin
with, the SEBI permitted equity derivatives named stock index futures. The BSE introduced on
9 June, 2000 stock index futures based on the sensitive Index named BSX, and NSE started on June
12, 2000 stock index future based on its index S&P CNX NIFTY in the name of NFUTIDX NIFTY.

Did u know? How many scripts are included in SENSEX and S&P CNX NIFTY?

SENSEX comprised 30 and S&P CNX NIFTY comprised 50 scripts.
2.1 Derivatives in India

India has been trading derivatives contracts in silver, gold, spices, coffee, cotton and oil etc. for
decades in the grey market. Trading derivatives contracts in organized market were legal before
Morarji Desai's government (1977) which banned forward contracts. Derivatives on stocks were
traded in the form of Teji and Mandi in unorganized markets. Recently futures contracts in

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