Term Paper_ Evolution of Derivatives in India

7/25/2019 Term Paper_ Evolution of Derivatives in India

1/20

Evolution of Derivative in India

Page 1of 20

CIS -TERM PAPER//FPRM/IRMA (2008-09)

1. Introduction

Derivative products initially emerged as hedging devices against fluctuations in stock and

commodity prices, and financial and commodity-linked derivatives remained the sole form of

such products for almost three hundred years. By defining the term precisely, a derivative is a

product whose value is derived from the value of one or more underlying variables or assets in a

contractual manner. The underlying asset can be equity, forex, commodity or any other asset. In

our earlier discussion, we saw that wheat farmers may wish to sell their harvest at a future date to

eliminate the risk of a change in prices by that date. Such a transaction is an example of a

derivative.

Financial derivatives came into spotlight in the post-1970 period due to growing instability in the

financial markets1. However, since their emergence, these products have become very popular

and by 1990s, they accounted for about two-thirds of total transactions in derivative products. In

recent years, the market for financial derivatives has grown tremendously in terms of variety of

instruments available, their complexity and also turnover. In the class of equity derivatives theworld over, futures and options on stock indices have gained more popularity than on individual

stocks, especially among institutional investors, who are major users of index-linked derivatives.

Even small investors find these useful due to high correlation of the popular indexes with various

portfolios and ease of use. The lower costs associated with index derivatives vis--vis derivative

products based on individual securities is another reason for their growing use.

2. Financial Derivatives in India

A liquid market for forward foreign exchange contracts has existed in India for several decades

now. This product is still the main instrument for hedging foreign exchange risk in India,

although foreign currency options are also getting increasingly popular. Over the last 10 years orso, several other types of derivatives have begun trading in India. As you are aware, efforts are

on for introduction of credit derivatives in India. Feasibility probes for foreign exchange futures

have begun. Efforts are also on for an appropriate design for interest rate futures. In the recent

years, the regulatory ecosystem for financial derivatives has been sought to be made more

effective and straight forward. Insertion of a new Chapter IIID to the RBI Act, 1934 by way of

an amendment in 2006 has been a milestone in this regard, since this has provided legal clarity as

regards OTC derivatives and has also defined regulatory domain and scope. Accounting

treatment of financial derivatives in banks is also being streamlined so as to be broadly in tune

with international standards.

L. C. Gupta committee (1998) came out with the major recommendations on the parlance of

financial derivative in India. In post-liberalization, the committee was in favour of that futures

trading through derivatives should be introduced in phased manner starting with stock index

1To mitigate the three risks, precisely, exchange rate risk, interest rate risk, and equities/market risk (systematic

risk).


2/20


Page 2of 20


futures, which will be followed by options on index and later options on stock. This, in turn, will

expedite the efficiency and liquidity of cash markets in equities through arbitrage process.

In continuation of the report, there should be two-level regulation, i.e. one at exchange level and other is at

SEBI level (for financial derivatives). Further there must be considerable emphasis on self regulatory

competence of derivative exchanges under the overall supervision and guidance of SEBI. The derivative

trading should be initiated on a separate segment of existing stock exchange having an independentgoverning council. The number of the trading members should be limited to 40 percent of the total

members. The chairman of the governing council will not be permitted to trade on any of the stock

exchange. The settlement of derivatives will be through an independent clearing corporation (e.g. National

Securities Clearing Corporation of India Limited, (NSCCL) looks after the settlement issue in India) house,

which will become counter-party for all trades or alternatively guarantees the settlement of all trades. The

clearing corporation will have adequate risk containment measure (four-sigma level at Value at Risk, 99%

level of Confidence of Interval) and with collect margins through electronic fund transfer (EFT). The

derivatives exchange will have on line trading and adequate surveillance system. It will disseminate trade

and price information on real time basis through two information vending networks which should inspect

100 percent of members every year. There will be complete segregation of client money at the level of

trading/clearing member level and even at the level of clearing corporation. The clearing members should

deposit minimum Rs 50 lakhs with clearing corporation (both for trading cum clearing member (TCM) and

permanent clearing member (PCM) and should have a net worth of rs.3 crore. Committee raised the pointfor the removal of the regulatory prohibition on the use of derivatives by mutual funds while making the

trustees responsible to restrict the use of derivatives by mutual funds only to hedging and portfolio

balancing and not for restriction. The operations of the cash market on which the derivatives market will be

based, needed improvement in many areas. The committee asked for the creation of a derivative cell, a

Derivative Advisory Committee, and Economic Research wing by SEBI and the declaration of Derivatives

as securities under Section 2 (h) of the SC(RA) and suitable amendments in the notification issued by t hecentral Government in June, 1969 under Section 16 of the SCRA (Gupta, 2005, pp.121-122).

2.1. Categories of Derivatives Traded in India

Commodities futures for coffee, oil seeds, and oil, gold, silver, pepper, cotton, jute and jutegoods are traded in the commodity futures. FMC regulates the trading of commodities futures

and controls the trading nuances for 21 regional level exchanges including 3 national level multicommodity exchanges.

Index futures based on Sensex and NIFTY index are also traded under the supervision of SEBI.

The RBI has permitted banks, and primary dealers (PDs, although before 2007 regulation beingratified on futures market, financial institutions were permitted) to enter into forward rate

agreement (FRAs)/interest rate swaps in order to facilitate hedging of interest rate risk and

ensuring orderly development of the derivatives markets.

The National Stock Exchange (NSE) became the first exchange to launch trading in options on

individual securities apart from index futures/options. Trading in options on individual securitiescommenced from July, 2001. Options contracts are American style and cash settled and are

available in about 40 securities stipulated by SEBI.

The NSE commenced trading in futures on individual securities on November 9, 2001. The

futures contracts are available in about 31 securities stipulated by SEBI. The BSE also started

trading in stock options and futures (both index and stocks) around at the same time as the NSE.


3/20


Page 3of 20


The NSE commenced trading in interest rate future on June 2003. Interest rate futures contracts

are available on 91-day T-bills, 10-year bonds, and 10-year zero coupon bonds as specified by

the SEBI.

There are other schemes and categories of derivatives like exchange traded bonds, options and

currency futures to be introduced subsequently on futures trading platform. A notable changeobserved in the year of 2008 is about currency futures which were commenced on August 29,

2008.

CME (Chicago Mercantile Exchange) created the first financial futures in 1972 when it offered a futures

contract between the dollar and seven currencies. It is, therefore, interesting to notice that Indian

Commodity Exchanges have also lined up to offer currency derivatives trading. But the success of the

trading will depend on the market microstructure and how it evolves over timethe first issueis the linkbetween the existing OTC market and the exchange-traded futures market that is about to kick off soon.

While the OTC market will understandably continue to dominate in volume terms, the first-cut structure of

the futures market seems to indicate that fetters have already been put on its growth. The nuance behind it

isparticipants in the exchange cant keep an open position larger than $5 million, a small limit compared tothe typical hedging needs of those with currency exposures. While speculators provide the liquidity and

efficient price discovery to any market, their role will be constrained by the predominance of the OTC

market and the apprehension of illiquidity in the futures market. Second, the report of technical committee

on exchange traded currency futures ahs prescribed that trading hours be restricted between 9 am to 5 pm.

Apart from raising financial questions about why the committee should be bothering about this issue, and

not leaving it to the discretion of exchange, it also displays the regulators determination to keep its controlover even the futures market. The OTC market is largely a telephone-quote driven market, dominated by

banks. The RBI typically uses one of the large public sector banks to send its currency signals through this

market, despite all claims of allowing the rupee to float freely. With markets closing simultaneously and

the OTC markets signaling role dominating, the futures markets will have to necessarily follow, and notleadthird, the market has forbidden entry to non-resident Indians and foreign institutional investors(FIIs). Most overseas investors, especially portfolio investors, have turned to the Singapore-based non-

deliverable forwards market to hedge their investments in India. The regulators have looked as this offshore

market has grown in size. That begs the question: is there a future for the currency futures market, without

full convertibility or without round-the-clock trading? (Singhal, 2008: adapted from ET, under the editorial

column, Future of Currency Futures: Serendipity)

TABLE 1: Calendar of Introduction of Derivatives Products in Indian Financial Markets

OTC Exchange traded

1980s-Currency forwards June, 2000-Equity index futures

1997-Long term foreign currency, rupee

swaps

June, 2001-Equity index options

July, 1999-Interest rate swaps and FRAs July, 2001-Stock option

July, 2003-FC-rupee options June, 2003-Interest rate futures

August, 2008-Currency futuresSource:www.derivativesportal.com

TABLE 2: Financial Derivatives in India: A Chronology

Date Progress

14 December, 1995 NSE asked SEBI for permission to trade

futures

18 November, 1996 SEBI setup L.C.Gupta committee to draft apolicy framework for index futures

11 May, 1998 L.C.Gupta committee submitted report
http://www.derivativesportal.com/http://www.derivativesportal.com/http://www.derivativesportal.com/http://www.derivativesportal.com/


4/20


Page 4of 20


7 July, 1999 RBI gave permission for OTC forward rate

agreement (FRAs) and interest rate swaps

24 May, 2000 SIMES chose NIFTY for trading futures and

options on an Indian index

25 May, 2000 SEBI gave permission to BSE and NSE to do

index futures trading9 June, 2000 Trading of BSE sensex futures commenced at

BSE

12 June, 2000 Trading of NIFTY futures commenced at NSE

31 August, 2000 Trading of futures and options on NIFTY to

commence at SIMES

July, 2001 Trading on equity futures commenced at NSEon 31 securities

June, 2003 Trading on interest rate futures commenced at

NSE

July, 2003 Trading on FC-rupee options started

August, 2008 Currency Futures derivatives- mooted on theplatform of SEBI, RBI, BSE, and NSE

3. Evolution of Financial Derivatives in India

The most praiseworthy development in the history of secondary segment of the Indian Stock

market is the commencement of derivatives trading in June, 2000. The SEBI approved

derivatives trading based on futures contract at National Stock Exchange (NSE) and Bombay

Stock Exchange (BSE) in accordance with bye-laws/rules and regulations of the stock

exchanges. To begin with, the SEBI permitted equity derivatives named stock index futures,

which was introduced on BSE on 9 June, 2000 based on the sensitive index (also referred to as

SENSEX comprising 30 scripts) named BSX, and NSE started on June 12, 2000 stock index

future based on its S&P 500, CNX, NIFTY (comprised 50 scripts) in the name of

NFUTIDXNIFTY. Further the details are furnished as under (Gupta, 2005; Sinha, and Nath,

2001).

TABLE 3: Salient features of Index Futures Contract at BSE and NSE

S. No. Particulars BSE NSE

1 Date of commencement 9 June 2000 12June 2000

2 Name of Security BSX N FUTIDX NIFTY

3 Underlying asset BSE Sensitive index

(SENSEX)

S&P CNX NIFTY

4 Contract size Sensex value50 200 or multiples of200

5 Tick size/price step 0.1 point of Sensex

(equivalent to Rs.5)

Rs.0.05

6 Minimum Price fluctuation Rs.5 Not applicable

7 Price bands NA Not applicable


5/20


Page 5of 20


8 Expiration months 3-near months 3-near months

9 Trading cycle A maximum of 3

months, the near

month (1), the nextmonth (2), the a

month (3)

As in previous

column

10 Last trading/Expiry day Last Thursday of themonth or the

preceding day

As in previouscolumn

11 Settlement In cash on T+1 basis As in previous

column

12 Final Settlement price (FSP) Index closing price on

last trading day which

is computed on thebasis of the weighted

average of last 15

min. trading.

Index closing price on

1st trading day which

is weighted averagefor the last half an

hours trade.

13 Daily Settlement price (DSP) Closing of futurescontract which is

computed on the basis

of weighted averageof the last 5 min, or if

the no. of weighted

average of the last 5

trades.

Closing of futurescontract

14 Trading hours 9:30 am to 3:30 pm -

15 Margin Upfront margin on

daily basis

As in previous

columnSource: NSE and BSE weblinks,www.nseindia.comandwww.bse.com

4. Commodity Derivatives in India

The origin of derivatives can be traced back to the need of farmers to protect themselves against

fluctuations in the price of their crop. From the time it was sown to the time it was ready for

harvest, farmers would face price uncertainty. Through the use of simple derivative products, it

was possible for the farmer to partially or fully transfer price risks by locking-in asset prices.

These were simple contracts developed to meet the needs of farmers and were basically a means

of reducing risk. A farmer who sowed his crop in June faced uncertainty over the price he wouldreceive for his harvest in September. In years of scarcity, he would probably obtain attractive

prices. However, during times of oversupply, he would have to dispose off his harvest at a very

low price. Clearly this meant that the farmer and his family were exposed to a high risk of price

uncertainty.
http://www.nseindia.com/http://www.nseindia.com/http://www.nseindia.com/http://www.bse.com/http://www.bse.com/http://www.bse.com/http://www.bse.com/http://www.nseindia.com/


6/20


Page 6of 20


On the other hand, a merchant with an ongoing requirement of grains too would face a price risk;

that of having to pay exorbitant prices during dearth, although favorable prices could be obtained

during periods of oversupply. Under such circumstances, it clearly made sense for the farmer and

the merchant to come together and enter into a contract whereby the price of the grain to be

delivered in September could be decided earlier. What they would then negotiate happened to be

a futures-type contract, which would enable both parties to eliminate the price risk.

The Forwards Contracts (Regulation) Act, 1952, regulates the forward/ futures contracts in

commodities all over India. As per this the Forward Markets Commission (FMC) continues to

have jurisdiction over commodity forward/ futures contracts. However when derivatives trading

in securities was introduced in 2001, the term security in the Securities Contracts (Regulation)

Act, 1956 (SCRA), was amended to include derivative contracts in securities. Consequently,

regulation of derivatives came under the purview of Securities Exchange Board of India (SEBI).

We thus have separate regulatory authorities for securities and commodity derivative markets.

5. History of commodity derivatives: world sketch

Early forward contracts in the US addressed merchants' concerns about ensuring that there were

buyers and sellers for commodities. However credit risk remained a serious problem. To deal

with this problem, a group of Chicago businessmen formed the Chicago Board of Trade (CBOT)

in 1848. The primary intention of the CBOT was to provide a centralized location known in

advance for buyers and sellers to negotiate forward contracts. In 1865, the CBOT went one step

further and listed the first exchange traded derivatives contract in the US-these contracts were

called futures contracts. In 1919, Chicago Butter and Egg Board, a spin -off of CBOT, was

reorganized to allow futures trading. Its name was changed to Chicago Mercantile Exchange

(CME). The CBOT and the CME remain the two largest organized futures exchanges, indeed the

two largest financial exchanges of any kind in the world today.

The first stock index futures contract was traded at Kansas City Board of Trade. Currently the

most popular stock index futures contract in the world is based on S&P 500 index, traded on

Chicago Mercantile Exchange. During the mid eighties, financial futures became the most active

derivative instruments generating volumes many times more than the commodity futures. Index

futures, futures on T-bills and Euro-Dollar futures are the three most popular futures contracts

traded today. Other popular international exchanges that trade derivatives are LIFFE in England,

DTB in Germany, SGX in Singapore, TIFFE in Japan, MATIF in France, Eurex etc.

6. Evolution of commodity derivatives in India: a time line

Commodity Derivative markets were set up in India in cotton in 1875 and in oilseeds in 1900 at

Bombay. Forward trading in raw jute and jute goods started at Calcutta in 1912. Forward

Markets in Wheat had been functioning at Hapur since 1913, and in bullion at Bombay, since

1920. In 1919, the government of Bombay passed Bombay Contract Control (War Provision)


7/20


Page 7of 20


Act and set up the Cotton Contracts Board. With a view to restricting speculative activity in

cotton market, the Government of Bombay issued an Ordinance in September 1939 prohibiting

option business. Bombay Options in Cotton Prohibition Act, 1939, later replaced the Ordinance.

In 1943, the Defence of India Act was utilized on a large scale for the purpose of prohibiting

forward trading in some commodities and regulating such trading in others on an all India basis.

In the same year oilseeds forward contracts prohibition order was issued and forward contracts in

oilseeds were banned. Similarly orders were issued banning forward trading in food-grains,

spices, vegetable oils, sugar and cloth. These orders were retained with necessary modifications

in the Essential Supplies Temporary Powers Act 1946, after the Defence of India Act had lapsed.

With a view to evolving the unified systems of Bombay enacted the Bombay Forward Contract

Control Act, 1947.

6.1. Committee on Forward and Futures Markets: Review (1952-2001)

The Government of India appointed various committees at different time to look into the

regulatory framework of futures trading in the country. Tracing to different committees, in 1950,the Indian Government appointed the A.D. Shroff committee whose report formed the basis of

Forward Contracts (Regulations) Act, 1952. In 1966, the M.L. Dantwala Committee reviewed

the SCR Act and the functioning of the Forward Markets (FMC, 1953). Further, in 1993, GOI

constituted the committee, K.N.Kabra Committee which submitted its report in September, 1994

with the noted recommendations.

The commodity exchanges should enroll more members. Capital adequacy norms must be ensured for

smooth functioning. The commodity exchanges should be computerized to accommodate on-line trading

other than open outcry. Internal vigilance mechanism of the exchanges should be strengthened (circuit

breakers). Non-transferable specific delivery forward contracts should be freed from restrictions. Option

and range forward contracts may be introduced. However, this was not agreed by the Chairman of thecommittee. The exchanges should be recognized on permanent basis. The exchanges should be developed

into self-regulatory organizations. The Forward Markets Commission should be strengthened with more

powers including formation of statutory body of board of Directors. More commodities should be included

in futures trading like basmati rice, cotton seed, ground nut, rapeseed, linseed, copra, sesame seed, mustard

seed, soybean, etc. (Gupta, 2005: pp.156).

At the same time, in 1994, another committee was constituted under the chairmanship of

O.P.Sodhani on foreign exchange markets functioning. The reason behind the formation owing

to the forward contracts and options on foreign exchange are conducted through over-the-counter

(OTC) markets and regulated by RBI.

The companies should be given permission to book, cancel, and rebook options on foreign currencies.

Banks should offer range forward contracts. There should be no withholding taxes on derivatives

transactions. More liberty should be given to banks to use derivatives. More derivatives instruments like

caps, dollars, floors, FRAs, swaps should be allowed to offer by the banks to the traders without approval

of RBI. Different specific dealers should be allowed to offer derivatives instruments. Proper documentation

and market practices should be evolved for better functioning of the markets (Gupta, 2005: pp.157).


8/20


Page 8of 20


After almost three years, RBI set up a committee under the aegis of R.V.Gupta (1997) to review

Hedging through International Commodity Exchanges and other related issues. The

committees main recommendations are as under.

All the Indian companies with genuine commodity price risk exposures are to be allowed to hedge through

off shore commodity futures and option markets. The Central Government should grant permission for suchhedging transactions and the RBI should grant the necessary exchange control permission. Only hedging

contracts for genuine price exposure through international markets should be allowed, not the speculative

or profit seeking objectives. OTC instruments like vanilla swaps would only be permitted where they have

only efficient means of hedging. Use of options would not be allowed. The committee recommended a

phased manner approach. In Phase-I, the hedging should ordinarily be through exchange traded commodity

futures. Phase I would be a period of acclimatization. At this stage prior approval would be required to

ensure existence of genuine underlying risk, the appropriateness of the hedging instrument, and

adequateness of risk management procedures. In Phase-II, no prior approval, as recommended in Phase-I

should be needed. Only periodic scrutiny of actual transactions and auditors adequacy of control aresufficient. The committee further recommends that hedging should be allowed through foreign derivatives

markets (Gupta, 2005: pp.157).

In India, stock index futures are available for one-month, two month and three month maturities.All the open positions in these contracts are settled daily. Further, the buyers and sellers are

required to deposit margin (initial and maintenance margin if required) with the respective stock

exchanges as per the SEBI guidelines. To facilitate the effective risk management in the

derivatives segment, all the important measures like minimum net worth (50 lakh to 25 lakh

including PCM and TCM, NCDEX, 2003) requirement for the broker, determination of margin

based on value at risk model, position limit for various participants, mechanism for collection

and enforcement of margin, etc. have been put in place. Subsequently, the derivative products

range had been increased by including options and futures on the indices and on several highly

traded stocks. In an estimate, the product wise turnover of derivatives on the Indian stock

markets as on July 6, 2002 is stock futures (50%), index futures (21%), stock options (25%), and

index options (4%) showing that stock futures are most popular derivative traded at the stock

market of India.

During the last decade, to make stock market functioning effective for futures trading, the SEBI

has adopted several internationally tested and accepted mechanisms for implementation at the

Indian stock exchanges. For this, surveillance and risk containment like the circuit breaker, price

bands, value at risk (VaR) based margin collections, etc. have been introduced.

The SEBI set up a Technical Group headed by Prf. J.R. Verma, IIM -Ahmedabad (1996) to

prescribe risk containment measures for new derivative products. The group recommended the

introduction of exchange traded options on indices which is also conformity with the sequence ofintroduction of derivatives products recommended by the standing committee. The following are

the salient features of the risk containment framework for the trading and settlement of both

index futures and index options contracts.

European style options will be permitted initially. These will be settled in cash. Index option contracts will

have a minimum contract size of Rs. 2 lakh, at the time of its introduction. The risk containment measures

described hereunder are only for premium style European option. Index option contract will have a


9/20


Page 9of 20


maximum maturity of 12 months and a minimum of three strikes, i.e. in the money, near the money and out

of the money. A portfolio based margining approach, which would take an integrated view of the risk

involved in the portfolio of individual client, will be adopted. It is for the first time that such an approach is

introduced in the Indian Stock market. It is inconsistent with the practices followed in the countries. This

approach will not only cover the risk but also help in reducing the transaction costs in derivatives. The

initial margin requirements will be based on worst case loss of a portfolio of an individual client to cover a

99% value at risk (VaR) over a one day horizon. The initial margin requirement will be netted at level of

individual client and it will be on gross basis at the level of trading/clearing member. Further, the initial

margin requirement for the proprietary position of trading/clearing member will also be on net basis. The

short option minimum margin equal to 30% of the notional value of all short index options will be charged

if sum of the worst scenario loss and the calendar spread margin is lower than the short option minimums

margin. Net option value (strike price minus exchange rate minus premium or option price, St-K-P or K-St-

P) will be calculated the option times the number of options (positive for long position and negative for

short position) in the portfolio. The net option value will be added to the liquid net worth (LNW) of the

clearing member (TCM and PCM). For option positions, the premium will be paid in by the buyer in cash

and paid out to the seller in cash on T+1 day until the buyer pays in the premium due shall be deducted

from the available LNW on real time basis. In case of index futures contracts, the mark-to-market (MTM)

gains-losses for index futures positions will continue to be settledSEBIs technical group on newderivatives products has recently examined this issue and recommended the following measures for the

development of derivatives market. The systems of sub-brokers are to be used for increasing the volume of

trading in this market. Financial institutions and mutual funds should be permitted to sell short in the cashmarket for facilitating the free arbitrage between cash and derivatives market. However, such short sale

may be restricted to the extent of corresponding exposure in the derivative market. Arbitrage between cash

and derivatives markets will assist in better price discovery in both the markets (Gupta, 2005: pp.129).

However, the futures markets experts observed that due to lack of experience of the Indian

corporate sector regarding the functioning of international commodity exchanges (CME, CBOT,

LME, NYBoT2 etc.) derivatives and inadequate experience amongst auditors, a longer

acclimatization period of at least three years is desirable instead of one year as recommended

by the committee.

Policy initiatives in commodity markets. The expert committee (Shankarlal Guru committee,

2001) was set up by the Govt. of India, MoA to suggest measure for strengthening and

developing of agricultural marketing system in the country, had made several important

recommendations in the year of 2001 to initiate policy, legal and market infrastructure related

reform programs. MoA constituted an inter-ministerial task force to examine the

recommendations of the above expert committee and to suggest measures to be initiated for

implementation within a period of three months. The inter-ministerial force constituted nine

different sub groups on different aspects to examine the feasibility of implementing

recommendations made by the expert committee. One of the groups was dealt with forward and

futures market (Raipuria et al, 2001; Economic Advisory Group). The salient features of

presented report are as under.

Some insights drawn from the report is a reform packages suggested by Govt. of India and the

FMC on the commodity exchanges, furnished below. (Prior to establishment of electronic

auction-traded exchanges in India)

2 CME-Chicago Mercantile Exchange, CBoT, Chicago Board of Trade, LME, London Mercantile Exchange,

NYBoT, New York Board of Trade (Commex)


10/20


Page 10of 20


The system of daily mark-to-market (MTM) margining (based on contract specified maintenance margin) is

to improve financial integrity of the markets. The system of simultaneous reporting under which

members/brokers are required to put the transaction slips in a sealed box within fifteen minutes of

execution of transaction. This measure facilitates audit trail and ensures that clients contracts are executedat a correct price. Trading ring discipline to be ensured by appointing a ring inspector, issuing of badges,

prohibiting the entry of unauthorized persons in pit, surprise checks is to be ensured by exchanges. The

exchanges are to appoint a qualified secretary to look after its day-to-day operation. Representation of

diverse groups like growers, processors, exporters, and importers are included in commodity futures

market. The commodity exchanges are to introduce a system of guaranteeing performance of the contract.

However, the manner in which the contracts would be guaranteed by the exchange or a separate clearing

house/corporation is left to the individual exchanges. Exchanges like IPSTA, BCE have set up independent

clearing houses, which guarantee performance of the contract. Other exchanges have set up, or are in

process of setting up, of Trade Guarantee Fund (TGF) within exchange to guarantee performance ofcontracts.

The commodity exchanges are to amend their rules/Articles of Association so as to provide alteast one third

of the total strength of Board of Directors to be independent and non-trading directors. The measure has

been taken to professionalize the Board of exchanges in public interest and in the general trade interest. The

exchanges should be run as public institutions. Adoption of an online trading platform has been a necessary

condition for the exchanges recognized for futures trading in edible oil seed complex (FMC Bulletin, 2002:

pp.211-212).

From trading statistics during the latter half of the nineties volumes (VOT) and value of trading

(NOP) in some of the exchanges had reached reasonable levels while others had been striving

and the summary position is as follows.

TABLE 4: Volume of Trading and Net Open Position of consolidated regional exchanges

(Commodities)

Year VoT (Rs. in bn)

1996-97 313.56

1997-98 314.79

1998-99 326.50

1999-00 228.59

2000-01 273.80

Source: FMC Bulletin, Vol. XLIV (1), Jan 2002

6.2. Progress in Indian Commodity Markets (1999-2001): Summing Up

The four exchanges which were recognized for edible oil seed complex like BCE, Mumbai,

NBoT, Indore, Kanpur commodity exchange, Kanpur, First commodity exchange, Kochi have

assured to go online in stipulated time-frame. The commission has been adopting a persuasive

approach by impressing them the need of switching over to online trading platform. BCE has

already introduced online trading, East India Cotton Association (EICA), and India Pepper andSpice trade association (IPSTA) have made substantial progress in this direction (shown in

Annexure 1& 2).

3The drastic decline in value of trading in 1999-2000 was mainly on account of the reduced trading at the Jute

Exchange at Kolkata (dropped from Rs. 5022 to Rs.1234 mn) and castor seed exchange at Ahmedabad (decreased

from Rs. 6854 to Rs. 5220mn); refer to FMC Bulletin, Vol. XLIV (1), Jan 2002.


11/20


Page 11of 20


Many exchanges have developed software for their back office operations and provided e-mail

connectivity. All the commodities are not suited for futures trading, for a commodity to be

suitable for futures trading it must possess the following characteristics, the commodity should

have a suitable demand and supply conditions, i.e. volume (production) and marketable surplus

should be large; price should be volatile to necessitate hedging through future trading, in this

case

persons with spot market commitment face a price risk. Resulting there would be demand

for hedging facilities. The commodity should be free from substantial control from Govt.

regulations (or other bodies) imposing restrictions on supply, distribution, and prices of the

commodity. The commodity should be homogeneous (assaying quality, quantity) or alternately it

must be possible to specify standard grade and to measure deviations from the grade. This

condition is necessary for the futures trading in standardized contract. The commodities should

be storable andin absence of this condition arbitrage would not be possible and there would be

no relationship between spot and futures market. Based on the above criteria and as a follow up

of the recommendations of the Kabra committee (1994) the Government has permitted futures

trading in various commodities. However, the current practice in USA and other Westerncountries is to allow futures trading in a range of commodities including live cattle, feeder cattle,

hogs, pork bellies, fluid milk, rubber, tea, wool, and industrial metals like copper, gold, lead,

aluminium, silver, zinc and even in a number of non-commodities such as weather index and

pollution permits (FMC, 2002-03).

TABLE 5: Trends in volume trade on Futures Exchange

2002-03 2003-04 2004-05 2005-06 2006-07

Turnover

(Rs. in Cr)

66,530 1,29,363 5,71,759 21,34,471 33,27,633

Growth (%) 92.8 94.4 342.0 273.3 55.9Source: Annual Report, Ministry of Consumer Affairs, Food and Public Distribution, 2007, Delhi

TABLE 6: Trends in Exchange-wise Turnover

Value (Rs Crore) Share (%)

2005 2006 2007 (Jan-Mar)

2005 2006 2007 (Jan-Mar)

MCX(market

share)

41.7 59.9 74.1

Metals 3,91,693 16,87,759 5,30,345 61.8 83.3 79.0

Energy 1,41,327 1,68,319.8 97,653 22.3 8.3 14.6

Agriculture 1,00,303 1,69,589.7 43,027 15.8 8.4 6.4

Total 6,33,324 20,25,668 6,71,027 100.0 100.0 100.0NCDEX(market

share)

57.5 36.8 24.7

Metals 1,04,654 2,26,741 26,884 12.0 18.2 12.0

Energy 3,560 4,042.3 1,323 0.4 0.3 0.6

Agriculture 7,66,712 10,12,555 1,95,018 87.6 81.4 87.4

Total 8,74,927 12,43,339 2,23,226 100.0 100.0 100.0

NMCE(market 0.8 3.3 1.2


12/20


Page 12of 20


share)

Metals 8,116 3,689 7.3 33.3

Agriculture 12,133 1,03,226 7,379 100.0 92.7 66.7

Total 12,133 1,11,343 11,068 100.0 100.0 100.0

Grand Total 15,20,385 33,80,350 9,05,322.7

Source: Market Review, Forward Markets Commission (www.fmc.gov.in)

7. Growth of Commodity Futures Market: Review (2003-2007)

The year 2003 is a watershed in the history of commodity futures market. The last group of 54

prohibited commodities was opened up for forward trading, along with establishment and

recognition of three new national exchanges with on-line trading and professional management.

Not only was prohibition on forward trading completely withdrawn, including in sensitive

commodities such value of trading since 2004-05. Although agricultural commodities led the

initial spurt, and constituted the largest proportion of the total value of trade till 2005-06

(55.32%), this place was taken over by bullion and metals in 2006-07. The growth in 2006 as

wheat, rice, sugar and pulses which earlier committees had reservations about, the new

exchanges brought capital, technology and innovation to the market. These markets notched upphenomenal growth in terms of number of products on offer, participants, spatial distribution and

volume of trade. Starting with trade in 7 commodities till 1999, futures trading is now available

in 95 commodities out of 103 allowable commodities for participation in trading (Nath and

Lingareddy, 2008). There are more than 3000 members registered with the exchanges. More than

20,000 terminals spread over more than 800 towns/cities of the country provide access to trading

platforms. The volume of trade has increased exponentially since 2003- 04 to reach Rs. 36.77

lakh crore in 2006-07. Almost all of this (97.2%) of this is now accounted for by the three

national exchanges. The other 21 Exchanges have a miniscule share in the total volume. (Sen et

al., 2007, FMC)

The growth in commodity futures trade has spawned an upsurge of interest in a number of

associated fields, viz. research, and education and training activities in commodity markets,

commodity reporting for print and visual media, collateral management, commodity finance,

ware-housing, assaying and certification, software development, electronic spot exchanges etc.

Markets and fields almost non-existent four years ago now attract significant mind-share

nationally and internationally.

7.1. Major breakthrough in commodities futures

Futures contracts are available for major agricultural commodities, metals and energy.

Commodity group-wise -07 was almost wholly (88.7%) accounted for by bullion and metals,with agricultural commodities contributing a small fraction (10.7%). This was partly due to the

stringent regulations, like margins and open interest limits, imposed on agriculture commodities

and the dampening of sentiments due to suspension of trade in few commodities. Futures market

growth in 2006-07 appears to have bypassed agriculture commodities.
http://www.fmc.gov.in/http://www.fmc.gov.in/http://www.fmc.gov.in/http://www.fmc.gov.in/


13/20


Page 13of 20


TABLE 7: Commodity-wise Trends in Volume-traded

2005

January-

December

Share

(%)

2006

January-

December

Share

(%)

2007

January-

March

Share

(%)

Growth

in 2006

(%)

Precious

metals:

4,87,333 32.1 16,81,220 49.7 3,86,523 42.7 245

Gold 2,06,398 13.6 10,45,573 30.9 2,04,261 22.6 407

Silver 2,80,935 18.5 6,35,647 18.8 1,82,263 20.1 126

Basemetals: 3916 0.3 2,33,449 6.9 1,73,353 19.1 5,861

Aluminium 31 5,072 0.2 3,966 0.4 16,181

Copper 3,544 0.2 1,76,941 5.2 99,909 11.0 4,893

Lead 337 1,110 0.1

Nickel 230 946 11,996 1.3 311

Tin 111 193 335 0.0 74

Zinc 49,960 1.5 56,037 6.2

Ferrous 5,099 0.3 7,947 0.2 1,043 0.1 56Energy: 1,44,888 9.5 1,72,362 5.1 98,978 10.9 19

Crude oil 1,44,288 9.5 1,37,372 4.1 87,181 9.6 -5

Natural gas 32,625 1.0 11,793 1.3

Polymers 489 1,229 - 151

Agri: 8,79,149 57.8 12,85,372 38.0 2,45,426 27.1 46

Cereal 10,664 0.7 34,543 1.0 2,749 0.3 224

Fibre 9,327 0.6 7,602 0.2 2,401 0.3 -18

Oil

Complex

1,04,548 6.9 1,28,854 3.8 46,971 5.2 23

Pulses 3,00,699 19.8 5,16,137 15.3 45,713 5.0 72

Plantations 4,828 0.3 6,944 0.2 4,005 0.4 44

Spices 27,606 1.8 1,46,482 4.3 87,972 9.2 431

Others 4,21,477 27.7 4,44,808 13.2 60,615 6.7 6

Total 15,20,385 100 33,80,350 100 9,05,323 100 122Source: Forward Markets Commission, NCDEX, and MCX, Mumbai, 2007

TABLE 8: Commodity Group-wise value of trade (Rs. in lakh Crore)

Commodity

Groups

((Rs. in lakhs

Cr)

2004-05 2005-06 2006-07 2007-08

Bullion and

other metals

1.80 (31.47) 7.79 (36.15) 21.29 (57.90) 26.24 (64.55)

Agriculture 3.90 (68.18) 11.92 (55.31) 13.17 (35.82) 9.41 (23.15)


14/20


Page 14of 20


Energy 0.02 (0.35) 1.82 (8.45) 2.31 (6.28) 5.00 (12.30)

Others 0.00 (0.00) 0.02 (0.09) 0.001 (0.00) 0.00 (0.00)

Total 5.72 (100.00) 21.55 (100.00) 36.77 (100.00) 40.65 (100.00)

Source: Sen, 2008: FMC Expert Committee Report the impact of futures trading on agricultural commodity prices

TABLE 9: Trends in turn-over of Agricultural Commodities (Rs. Crore)

January-

December

2005

Share (%) January-

December

2006

Share (%) January-

March

2007

Share (%)

Agriculture: 8,79,149,1 100 12,85,372.0 100 2,45,426 100

Guarseed 3,37,844.9 38.4 3,26,344.4 25.4 35,766 14.6

Gram 1,66,587.5 18.9 3,41,035.7 26.5 40,145 16.4Urad 1,06,012.3 12.1 1,45,333.9 11.3 3,004 1.2

Mentha Oil 19,354.3 2.2 63,041.6 4.9 11,241 4.6

Tur 24,055.8 2.7 25,696.7 2.0 2,529 1.0

Soy oil 67,204.2 7.6 85,861.6 6.7 28,331 11.5

Guragum 35,301.8 4.0 15,980.5 1.2 1,458 0.6

Soy seed 14,493.9 1.6 22,145.4 1.7 8,620 3.5

Peeper 9,213.0 1.0 60,905.8 4.7 31,891 13.0

Jeera 10,879.8 1.2 33,124.5 2.6 38,241 15.6

Wheat 9,072.7 1.0 28,828.8 2.2 1,409 0.6

R Chillies 3,431.3 0.4 35,432.6 2.8 6,805 2.8

Source: Market Review, FMC (www.fmc.gov.in) (adapted from the article Impact of Futures Trading onCommodity Prices, (Nath and Ligareddy, 2008), published in Economic and Political Weekly.

Moreover, there has been a very significant decline in volume of futures trade in agriculture

commodities during the year 2007-08, by 28.5%. The overwhelming bulk of this decline is

accounted for by Chana, Maize, Mentha Oil, Guar seed, Potato, Guar Gum, Chillies and

Cardamom. Trade in these eight commodities, which accounted for 57.9% of total futures trade

in agricultural commodities in 2006-07, declined by over 66.4% during 2007-08 compared to

previous year. The decline in these eight commodities exceeded the decline of futures trading

volumes in all agricultural commodities taken together.

Four commodities (wheat, rice, urad and tur) were de-listed for futures trading towards the end

of financial year 2006-07. This de-listing has been held responsible in many circles for the recent

general downturn in futures trading in agricultural commodities. But these four de-listed

commodities together accounted for only 6.65% of the total value of futures trading in all

agricultural commodities in 2006-07. Thus, although this may have affected market sentiments
http://www.fmc.gov.in/http://www.fmc.gov.in/http://www.fmc.gov.in/http://www.fmc.gov.in/


15/20


Page 15of 20


adversely, the delisting did not have any major direct contribution to the decline in trading

observed during 2007-08.

In fact, except chana and urad, the share of sensitive commodities in total value of futures trade in

agricultural commodities has so far been quite insignificant. The combined share of other food grains (i.e.

wheat, rice, maize and tur) peaked at 5.0% in 2005-06 and of sugar at only 2.2%. This is in line with whatvarious Committees mentioned earlier had foreseen regarding prospects of futures trading in commodities

with significant government intervention. If, nonetheless, de-listing has adversely affected market

sentiment regarding futures trading more generally, this must be because of the go-stop nature ofgovernment policy on the matter (Sen et al, FMC, 2007).

7.2. Price Volatility issue of commodities

We have come across to witness the recent phenomena that futures prices of the commodities

leads to increase the spot or ready cash prices of the commodities owing to unscrupulous trading,

speculation and also enormous pressure on inventory functions and consumption functions

coupled with underlying market conditions. It has shown that 35.56 percent increase in minimum

support price (MSP) of rice, wheat, chana, and uradresulting into imposition of ban on futures

trading of the four commodities (Sen, 2008: FMC Expert Committee report)

Kamara (1982) found that the introduction of commodity futures trading gene rally reduced or at least did

not increase cash price volatility. The study compared cash market volatility before and after the

introduction of futures trading; thus, implicitly focused on the paradigm of introducing futures trading.

Singh (2000) investigated the Hessian cash (spot) price variability before and after the introduction of

futures trading (1988-97). Results of a multiplicative dummy variable model indicated that the futures

market has reduced the price volatility in the Hessian cash market. On the other hand, Dasgupta (2004)

found that there is a co-movement among futures prices, production decisions and inventory decisions. The

results showed that the futures price elasticity of inventory is inversely related to the carrying cost.

Therefore, an unnecessary hoarding will increase the carrying cost, leading to a lower responsiveness of

inventory to futures prices. This paper also determines the effect of expected production shocks on thefutures price elasticity of supply. Yang et al (2005) examined the lead-lag relationship between futures

trading activity and cash price volatility for major agricultural commodities. Granger causality tests and

generalized forecast error variance decompositions showed that an unexpected and unidirectional increase

in futures trading volume causes an increase in cash price volatility. Further, they found a weak causal

association between open interest and cash price volatility. Sahi (2006) studied the impact of introducing

futures contracts on the volatility of the underlying commodity in India. Empirical results suggest that the

nature of volatility has not changed with the introduction of futures trading in wheat, turmeric, sugar,

cotton, raw jute and soy oil. However, a weak destabilizing effect was found from futures to spot in the

case of wheat and raw jute. Further, results of Granger causality tests indicated that the unexpected increase

in futures activity in terms of increases in volumes and open interest has led to an increase in cash price

volatility in all the commodities listed. The study has confirmed the conception of the destabilizing effect

of futures trading on agricultural commodity prices. Thus, recent studies have shown mixed results

indicating that futures trading has either driven up or brought down volatilities in spot prices depending onthe commodities and underlying market conditions (Nath and Lingareddy, 2008:pp. 18-19 (2).


16/20


Page 16of 20


8.0 Concluding notes: Price Stability and Futures Trading

We need to understand the efficacy of the markets from the point of large stakeholders including

growers or producers who want to hedge the commodities either for buying or for selling,

processors, investors including wholesale and retail. Indian derivatives market has beenundergoing rapid changes in terms of policy implications and world economy. Even the price

volatility and price discovery are two important issues being addressed by todays economy.Precisely, conclusion lies in the line of the followings.

A market mechanism that is more efficient and viable for risk management and price discovery is the use of

futures, if there is wide participation by stakeholders. From a macro-development angle, this should

happen with appropriate measurement of risk. The present emphasis and reporting on trading turnover, be

it the stock or commodity market, lacks a macro-development framework. For example, resource

mobilization by capital markets has not kept pace with the increased turnover handled by the two

monoliths, BSE and NSE at all. On the other hand, small towns with meagre resources and small investors

have suffered all along, mainly due to the lack of any risk measurements and especially with liberalization.

This has indeed narrowed down market developments and SEBI recently set up a Market Development

Committee to look into this matter. The macro-development approach demands that the market performs

financial inter- mediation such that saving and investment rates rise and faster growth rates of GDP and

employment are achieved. Similarly in commodity futures, risk measurement, risk management and price

discovery are expected to affect macro-developments insofar as agricultural market reforms take place so

that agricultural growth in terms of GDP is achieved through the realization of higher value added and

employment. The speculative nature of futures however, is the Achiles heel of the market, as are illegal

trade and round tripping practices that are intended to avoid transparency and taxes. Such phenomena

persist and traders unabashedly claim that re- ported trade is only a fraction of the trading activity taking

place outside the regime. This subverts regulation, undermines macro-development and thus public interest.

An ideal framework of growth is that in which tensions between micro- and macro-level frameworks are

known and avoided in time and, where their compatibility is taken to maximize the value added to GDP

growth and employment. Know- ledge of tensions between micro- and macro-level frameworks requires

crafting of certain indicators, besides a symmetric perfect system for dissemination of information on

trading and prices, for both spot and futures which makes full use of the latest ICT. The ways in which

combining micro- macro development frameworks brings advantage to the economy are listed below:

TABLE 10: Micro-Macro development framework for Price Stability and Futures Market

Present Micro and

Short-term

development

framework

Desired Macro and

Long-term

development

framework

Advantage

Feasibility Test Being done To include GDPcontribution and

employment value-

trading services

Income andemployment growth

Bestpractices/services

Being developed Value-adding services A virtuous circle ofexpansion of futures

Focus On trading turnover Illegal and round-tripping in trading to

be stopped

Increased revenues toexchanges and state

Impact Comparison with spotprices

Real time informationdissemination

Growers knowledgeand efficient produce

management


17/20


Page 17of 20


Indicators None Futures Prices Index Trend awareness

Final result Narrow-based growth Broad-based growth Increased interest of

growers at largeSource: Raipuria, K (2003), Price Stability and Futures: Need for Macro-development framework, published in

Economic and Political Weekly.

Given the noisy nature of Indian wholesale and retail markets particularly in essential items like wheat,

rice, oilseeds and edible oils, symmetry in dissemination of real time spot and future prices will help

consumers at large. (Raipuria 2003: pp. 5330(1)


18/20


Page 18of 20


References

FMC (2002), Market Review, Vol. XLIV (1). Forward Markets Commission, Mumbai.

www.fmc.gov.in

Gupta, S.L. (2005). Financial Derivatives: Theory, Concepts and Problems, Prentice-Hall ofIndia Pvt. Ltd. Publication, New Delhi

Kolamkar, D.S. (2003) Regulation and Policy issues for Commodity Derivatives in India.

Retrieved from URL www.nmce.com/publication/dsk.jsp

MCX (2007): Market data, Multi Commodity Exchange of India Limited,www.mcxindia.com

Naik, Gopal & Jain, Sudhir (2002), Indian Agricultural Commodity Futures Market, Vol.37

(30), pp.3161-3173,Economic and Political Weekly

Nath, Golaka & Lingareddy, Tulsi (2008) Impact of Futures Trading on Commodity Prices: A

Performance Survey, Vol. 43 (3), pp.18-23,Economic and Political Weekly

National Stock Exchange of India Limited (2004). NCFM: Commodities Market Module Work

Book, pp. 11-27, Mumbai.www.nseindia.com,www.bse.com

NCDEX (2007): Market data, National Commodities & Derivatives Exchange of India Ltd.

www.ncdex.com

Raipuria, Kalyan (2003), Price Stability and Futures: Need for Macro-Development

Framework, Vol. 38 (51-52), pp. 5330,Economic and Political Weekly.

Sen, Abhijit (2008). Expert Committee report The study of Impact of Futures Trading on

Agricultural Commodity Prices, pp. 4-20, Ministry of Consumer Affairs, Food & Public

Distribution, New Delhi.

Thomas, Susan & Shah, Ajay (2003), Equity Derivatives in India: the State of the Art

Derivatives Markets in India, Published by Tata McGraw Hill. New Delhi. Retrieved from

www.igidr.ac.in
http://www.fmc.gov.in/http://www.fmc.gov.in/http://www.nmce.com/publication/dsk.jsphttp://www.nmce.com/publication/dsk.jsphttp://www.mcxindia.com/http://www.mcxindia.com/http://www.mcxindia.com/http://www.sebi.gov.com/http://www.sebi.gov.com/http://www.bse.com/http://www.bse.com/http://www.bse.com/http://www.ncdex.com/http://www.ncdex.com/http://www.igidr.ac.in/http://www.igidr.ac.in/http://www.igidr.ac.in/http://www.ncdex.com/http://www.bse.com/http://www.sebi.gov.com/http://www.mcxindia.com/http://www.nmce.com/publication/dsk.jsphttp://www.fmc.gov.in/


19/20


Page 19of 20


ANNEXURE-1

Details of the association conducting forward/futures trading are shown as under.

S. No Name of the association

(recognized under Section(6) of FCRA, 1952

Commodity

1 The Ahmedabad Commodity Exchange, Ahmedabad Castorseed (permanentrecognition w.e.f. 16

th May

1959

2 The Bombay Commodity Exchange ltd. Mumbai Castorseed (08.09.1959),

castor oil international, RBdpalmolin, sunflower oil, and

groundnut oil

3 Rajkot seeds Oil and Bullion Merchants Assn. Rajkot Castorseed

4 The East India Cotton Association Ltd. Mumbai Cotton

5 The Ahmedabad Cotton Merchants Assn. Ahmedabad Cotton (NTSD)

6 The Central Gujarat Cotton Dealers Assn., Vadodara Cotton (NTSD)

7 The South India Cotton Association, Coimbatore Cotton (NTSD)8 Bhatinda Om & Oil Exchange Ltd., Bhatinda Gur

9 The Chamber of Commerce, Hapur Gur and potatoes

10 The Meerut Agro Commodities Exchange Ltd., Meerut Gur

11 Rajdhani Oils & Oilseeds Exchange Ltd., Delhi Gur

12 Vijai Beopar Chambers Ltd., Muzzafarnagar Gur

13 The East India Jute & Hessian Exchange Ltd., Calcutta Jute & Jute goods (Hessian

Sacking)

14 India Pepper & Spice Trade Assn., Kochi Pepper (both domestic andinternational), recognized

from 02.04.1960

15 The Kanpur Commodity Exchange Ltd., Kanpur Rapeseed/Mustardseed, its Oiland oilcakes

16 The National Board of Trade Ltd., Indore Rapeseed/Mustardseed,

oilcake, Soyabean, its Oil andOilcake

17 The Spices & Oilseeds Exchange Ltd., Sangli Turmeric

18 First Commodity Exchange India Ltd., Kochi Copra, Coconut Oil and Copra

cake

19 Keshav Commodities Exchange Ltd., Delhi Potatoes

20 The Coffee Futures Exchange India Ltd., Bangalore

(the Associations Registered under Section 14 (B) of

Forward Contracts (Regulation) Act, 1952

Coffee: raw, Arabic

parchment, Robusta cherry,

Cured: Plantation A &Robusta Cherry AB

Source: FMC Bulletin, Vol. (), 2003


20/20


Page 20of 20

ANNEXURE 2

Reform initiatives have also reached other stake holders association with futures trading, besides

as the regulatory body (FMC), warehouse agencies, clearing corporations, trade guaranteeing

agencies, settlement bodies, all need to adapt to the emerging situation in order to make

commodity futures trading vibrant. The regulatory set up of various markets is presented below.

S. No. Institution Major Regulatory Functions

1 Reserve Bank of India Public debt, foreign exchangeinterest and financial structure

(FRBM)

2 Ministry of Finance (department of Economic

Affairs)

Capital markets, Public debt

related policy measures

3 Department of company affairs Company Act and related

issues of registration,

reporting etc.

4 Department of consumer affairs Policy issues related tocommodity futures trading

5 Securities and Exchange board of India Regulator for securities

market including securitiesderivative market

6 Forward Markets Commission Regulator for commodity

derivatives market

Term Paper_ Evolution of Derivatives in India

Documents

Transcript of Term Paper_ Evolution of Derivatives in India