WELCOME T0 DERIVATIVES SEGMENT
WHAT IS DERIVATIVES MARKET ?
Derivatives are contracts or products whose value is derived from the value of some other asset known as an underlying asset. Derivatives are based on a wide range of underlying assets. such as oil, coal, gold, silver, copper, zinc, wheat, sugar, coffee, cotton, bonds, shares, foreign exchange, etc….
HISTORY AND EVOLUTION
History of derivatives may be mapped back to several centuries. some of the specific milestones in the evolution of the derivatives market worldwide are given below :
12th Century – In European trade fairs, sellers signed contracts promising future delivery of the items they sold.
13th Century – there are many examples of contracts entered into by English Cistercian Monasteries, who frequently sold their wool up to 20 years in advance, to foreign merchants.
17th Century – In JAPAN at DOJIMA, near Osaka, the futures market in RICE was developed to protect rice products from bad weather or warfare.
In 1848, the CHICAGO BOARD OF TRADING facilitated the trading of forward contracts on various commodities. In 1865 the CBOT went setup further and listed the first EXCHANGE TRADED DERIVATIVE contract in the US. these contracts were called future contracts.
In 1972, the CHICAGO MERCANTILE EXCHANGE introduced the INTERNATIONAL MONETARY MARKET, which allowed trading In currency futures. Later in 1973, CHICAGO BOARD OPTIONS EXCHANGE became the first marketplace for trading listed options.
In 1977, CBOT introduced T – bond futures contracts, and 1982, CME introduced EURODOLLAR futures contracts, and KANSAS CITY OF TRADE launched the first stock index futures. finally, in 1983 Chicago Board Options Exchange introduced options on stock indexes with the S&P100 and S&P 500 indexes
INDIAN DERIVATIVE MARKET
SEBI set up a 24-member committee under the chairmanship of Dr . L.C . Gupta on November 18, 1996, to develop an appropriate regulatory framework for derivative trading in INDIA. The committee submitted its report on March 17, 1998, recommending that derivatives should be declared as ‘ SECURITIES ‘ so that the framework applicable to the trading of securities could also govern the trading of trading of derivatives.
IN 1999, the Securities Contract Regulation Act was amended to include ‘derivatives ‘within to domain of securities, and a regulatory framework was developed for governing derivatives trading.
IN 2000 June with SEBI permitted BSE AND NSE to introduce an equity derivative segment. To begin with, SEBI approved trading in index futures contracts based on CNX NIFTY AND BSE SENSEX ., which commenced trading in June 2000. Finally trading in options commenced in June 2001 and trading in option individual stocks commenced in July 2001 and futures contracts on individual stocks started in November 2001. In the initial days derivatives were used for hedging purposes but in the present days most people used for speculative …
-By
A Gowrish R Bhat
