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CH-1 Basics of Derivatives
Derivative meaning
A derivative is a contract or a product whose value is derived from the value of
some
other asset known as the underlying. Such as Gold, Silver, Shares, Bonds and
Foreign Exchange.
Growth of derivatives in markets
Increased fluctuations in underlying asset prices
Integration of financial markets globally.
Use of latest technology in communications
Frequent innovations in derivatives market and newer applications of
products.
Indian Derivatives Market
November 18, 1996, SEBI set up a 24 member committee under the
Chairmanship of Dr. L. C. Gupta for development of appropriate regulatory
framework for derivatives trading in India.
March 17, 1998, recommending that derivatives should be declared as
‘securities’
June 1998, under the Chairmanship of Prof. J. R. Varma, to recommend
measures for risk
containment in derivatives market.
In 1999, The Securities Contract Regulation Act (SCRA) was amended to
include
“derivatives” within the domain of ‘securities’ and a regulatory framework
was developed for governing derivatives trading.
In March 2000, the government repealed a three-decade-old notification,
which prohibited forward trading in securities.
CH-1 Basics of Derivatives 1
CH-1 Basics of Derivatives
Derivative meaning
A derivative is a contract or a product whose value is derived from the value of
some
other asset known as the underlying. Such as Gold, Silver, Shares, Bonds and
Foreign Exchange.
Growth of derivatives in markets
Increased fluctuations in underlying asset prices
Integration of financial markets globally.
Use of latest technology in communications
Frequent innovations in derivatives market and newer applications of
products.
Indian Derivatives Market
November 18, 1996, SEBI set up a 24 member committee under the
Chairmanship of Dr. L. C. Gupta for development of appropriate regulatory
framework for derivatives trading in India.
March 17, 1998, recommending that derivatives should be declared as
‘securities’
June 1998, under the Chairmanship of Prof. J. R. Varma, to recommend
measures for risk
containment in derivatives market.
In 1999, The Securities Contract Regulation Act (SCRA) was amended to
include
“derivatives” within the domain of ‘securities’ and a regulatory framework
was developed for governing derivatives trading.
In March 2000, the government repealed a three-decade-old notification,
which prohibited forward trading in securities.
CH-1 Basics of Derivatives 1
