Indian Derivatives Market

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Starting from a controlled economy, India has moved towards a world where prices fluctuate every day.

The introduction of risk management instruments in India gained momentum in the last few years due to liberalization process and Reserve Bank of India's (RBI) efforts in creating currency forward market.

Derivatives are an integral part of liberalization process to manage risk.

NSE gauging the market requirements initiated the process of setting up derivative markets in India.

In July 1999, derivatives trading commenced in India Table 2.1 Chronology of instruments

1991Liberalization process initiated
14-Dec-95NSE asked SEBI for permission to trade index futures.
18-Nov-96SEBI setup L.C.Gupta Committee to draft a policy framework for index futures.
11-May-98L.C.Gupta Committee submitted report.
07-Jul-99RBI gave permission for OTC forward rate agreements (FRAs) and interest rate swaps.
24-May-00SIMEX chose Nifty for trading futures and options on an Indian index.
25-May-00SEBI gave permission to NSE and BSE to do index futures trading.
09-Jun-00Trading of BSE Sensex futures commenced at BSE.
12-Jun-00Trading of Nifty futures commenced at NSE.
25-Sep-00Nifty futures trading commenced at SGX.
02-Jun-01Individual Stock Options & Derivatives

In less than three decades of their coming into vogue, derivatives markets have become the most important markets in the world. Today, derivatives have become part and parcel of the day-to-day life for ordinary people in major part of the world.

Until the advent of NSE, the Indian capital market had no access to the latest trading methods and was using traditional out-dated methods of trading. There was a huge gap between the investors' aspirations of the markets and the available means of trading. The opening of Indian economy has precipitated the process of integration of India's financial markets with the international financial markets. Introduction of risk management instruments in India has gained momentum in last few years thanks to Reserve Bank of India's efforts in allowing forward contracts, cross currency options etc. which have developed into a very large market.

Last Updated on 3/4/2011

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