imp dates in finance history

1. Derivatives Trading
By:-
Vidhu shekhar mishra

2. DERIVATIVES
The securities contract regulation act defines
derivatives to include
(1)A security derived from the debt
instrument/share/secured or unsecured
loan/risk/instrument/contract for
differences/any other form of security,
(2)A contract which derives its value from the
prices/index of prices of underlying securities.

3. Derivatives Trading
• The first step towards introduction of derivatives
trading in India was the promulgation of the Securities
Laws(Amendment) Ordinance,1995,which withdrew
the prohibition on options in securities.
• The SEBI setup the committee under the chairmanship
of Dr. L.C. Gupta on November 18,1996 to develop
appropriate regulatory framework for derivatives
trading in India.This committee on March 17 1998
recommended that derivatives should be declared as
“securities” so that the regulatory framework
applicable to the trading of ‘securities’ could also
govern the trading of derivatives.

4. • The SCRA(Securities Contracts (Regulations) Act)
was amended in December 1999 to include
derivatives with in the ambit of ‘securities’ and
the regulatory framework was developed for
governing derivatives trade.The Act also made it
clear that derivatives would be legal and valid
only if such contracts are traded on recognized
stock exchanges,thus precluding OTC derivatives.
• Derivatives Trading commenced in India in june
2000 after the SEBI granted the final approval to
this effect in May 2001.

5. • Derivative is a product whose value is derived
from the value of one or more basic variables
called base (underlying asset/index/reference
rate), in a contractual manner . The underlying
asset can be equity/forex/any other asset.The
price of the derivative is driven by the spot
price of the asset price which is “underlying”.

6. TYPES
• The most commonly used derivative contracts are
(1)Forward Contract:-A forward contract is an agreement to exchange
an asset, for cash,at a predetermined future date specified today.
(2)Future s/Future Contract:-Future Contracts are transferable specific
delivery forward contracts.They are agreement between two
counter parties to fix the terms of an exchange/lock-in the price
today of an exchange that will take place between them at some
fixed future date.
The period of contract (deferment) may vary between 3 to 21
months.Depending on the underlying assets,they could be
Commodity/financial futures and stock index futures().
(3)Options:----
……………….under const.