Page 19 - DMGT513_DERIVATIVES_AND_RISK_MANAGEMENT

Derivatives & Risk Management

Notes indices and options on individual securities. The trading in index options commenced in June
2001 and the trading in options on individual securities commenced in July 2001. Futures contracts
on individual stocks were launched in November 2001.

Table 2.2: Salient features of Index Futures Contracts at NSE

S. No. Items NSE
1. Date of Introduction June 12, 2000
2. Name of security N FUTIDX NIFY
3. Underlying asset S&P CNX NIFTY
4. Contract size 200 or multiples of 200
5. Tick size/Price step 0.05
6. Minimum price fluctuations Not applicable
7. Price Bands NA
8. Expiration months 3-nears months
9. Trading cycle As in previous column
10. Last trading/Expiry day As in previous column
11. Settlement As in previous column
12. Final Statement price 1 trading day(s)
st
13. Daily settlement price Closing of future contract
14. Trading hours -
15. Margin As in previous column

Self Assessment

Fill in the blanks:
1. The most notable of development in the history of secondary segment of the Indian stock
market is the commencement of derivatives trading in …………….. .
2. The BSE introduced on 9 June, 2000 stock index futures based on the sensitive Index named
…………...... .

3. The trading in index ……….. commenced in June 2001 and the trading in options on
individual securities commenced in July 2001.
4. Futures contracts on individual stocks were launched in ……………. .

5. A primary motivation for ………..a buyer or seller for a stock of commodities in early
forward contracts was to lessen the possibility that large swings would inhibit marketing
the commodity after a harvest.

2.2 Regulations for Derivatives Trading

All futures transactions in the United States are regulated by the Commodity Futures Trading
Commission (CFTC), an independent agency of the United States Government. The Commission
has the right to hand out fines and other punishments for an individual or company who
breaks any rule. Although by law the commission regulates all transactions, each exchange can
have their own rule, and under contract can fine companies for different things or extend the
fine that the CFTC hands out. The CFTC publishes weekly reports containing details of the

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