BSE to kick off mock trading in options by May 19

Our Markets Bureau

Mumbai, May 16: THE Stock Exchange, Mumbai (BSE) is all set to kickstart the mock trading sessions for Sensex options from May 19, 2001. These mock trading sessions are intended to stimulate options trading environment and will familiarise the members with the system. The mock trading will enable the participants to be fully conversant with the features of the Derivatives Trading and Settlement Software (DTSS) — as to how to place orders, to monitor their positions, to exercise options bought or to transfer positions of institutional clients to custodians.

Representatives nominated by the members of the exchange can participate in these sessions, which will be held in the BSE Training Institute. KThe National Stock Exchange is also gearing up for the launch of index-based (Nifty) options by May end. Sebi has given permission to the stock exchanges to introduce both index options and options on individual stocks.

Sebi has outlined the risk management framework for index options. Initially premium style index options shall be permitted. These shall be settled in cash. A portfolio-based management approach, which would take an integrated view of the risk involved in the portfolio of each individual client, shall be adopted. This approach is being introduced for the first time in the Indian securities markets and is consistent with the practices being followed globally. A portfolio approach would not only cover the risk but also help in reducing transaction costs in derivatives.

Index options contracts shall have a minimum contract size of Rs 2 lakh, a maximum maturity of twelve months and a minimum of three strikes (in the money, near the money and out of the money).