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SEBI Board approves New Derivative Products


As a step intended to progressively encourage markets to move onshore, the SEBI Board, in principle, approved introduction of new derivative products for the Indian market based on the interim recommendations made by the SEBI Committee on Derivatives headed by Prof. M. Rammohan Rao. The products will be introduced under suitable regulatory framework in due consultation wherever necessary with other regulatory authorities.

These new derivative products will be relating to:

(1) Mini-contracts on equity indices,

(2) Options with longer life/tenure,

(3) Volatility index and F&O contracts,

(4) Options on Futures,

(5) Bond Indices and F&O contracts,

(6) Exchange-traded currency (foreign exchange) Futures & Options, and

(7) Introduction of exchange-traded products to cater to different investment strategies.

It is expected that these new derivative products will provide investors with a larger range of risk mitigation products and create more activity in the Indian onshore markets. These products are also expected to bring transactions based on private-synthetic products to an exchange-traded transparent mechanism with appropriate regulatory supervision.

The Board also mandated that a wider consultative process be followed before finalizing the specifications of these products and information about the products be disseminated to the market participants. However, the introduction of such products will depend on the product design, risk mitigation features and conformity to regulatory requirements. In addition to these interim recommendations, the SEBI Committee on Derivatives is expected to finalize its recommendations on suitable OTC derivative products for the Indian markets.

SEBI guidelines on Offshore Derivative Instruments (Participatory Notes) dated 25th October 2007 ...click here

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