DERIVATIVES MARKET
Trading in derivatives of securities commenced in June 2000 with the enactment of enabling legislation in early 2000. Derivatives are formally defined to include:
(a) a security derived from a debt instrument, share, loan whether secured or unsecured, risk instrument or contract for differences or any other form of security, and
(b) a contract which derives its value from the prices, or index of prices, or underlying securities. Derivatives trading in India are legal and valid only if such contracts are traded on a recognised stock exchange, thus precluding OTC derivatives.
Derivatives trading commenced in India in June 2000 after SEBI granted the approval to this effect in May 2000. SEBI permitted the derivative segment of two stock exchanges, i.e. NSE and BSE, and their clearing house/corporation to commence trading and settlement in approved derivative contracts.
To begin with, SEBI approved trading in index futures contracts based on S&P CNX Nifty Index and BSE-30 (Sensex) Index. This was followed by approval for trading in options based on these two indices and options on individual securities. The derivatives trading on the NSE commenced with S&P CNX Nifty Index futures on June 12, 2000.
The trading in S&P CNX Nifty Index options commenced on June 4, 2001 and trading in options on individual securities commenced on July 2, 2001. Single stock futures were launched on November 9, 2001. In June 2003, SEBI-RBI approved the trading on interest rate derivative instruments. The Mini derivative Futures & Options contract on S&P CNX Nifty was introduced for trading on January 1, 2008 while the long term option contracts on S&P CNX Nifty were introduced for trading on March 3, 2008.
