Market regulator Securities and Exchange Board of India (Sebi) on Wednesday decided to introduce seven new derivative instruments like mini contracts and long-tenure options to give more choice to investors. The move is expected to prevent partial export of the Indian market overseas and intended to progressively encourage markets to move onshore.
?It is expected that these new derivative products will provide investors with a larger range of risk mitigation products and create more activity in Indian onshore markets,? Sebi said in a statement after a Board meeting here.
These new products relates to mini contracts on equity indices, options with longer life/tenure, volatility index and F&O contracts, options on futures, bond indices and F&O contracts, exchange-traded currency (foreign exchange) futures and options, and introduction of exchange-traded products to cater to different investment strategies, Sebi said. The decision is based on the interim suggestions made by the panel on derivatives headed by M Rammohan Rao.
Derivatives are defined as forward, futures, option or any other hybrid contract of fixed duration linked to the value of a specified real or financial asset or an index of securities. The value of a derivative is derived from the value of the underlying assets which can be securities, commodities, bullion, currency, live stock or anything else.
The regulator also said these products, to be launched under a suitable regulatory framework to be worked out in consultation with other regulators and stakeholders, were expected to bring transparency in trading of derivative instruments. The timeframe for starting these products depends on their design, risk mitigation features and conformity to regulatory requirements.
According to Siddarth Bhamre, analyst and fund manager, Angel Broking, ?Of the new products approved by Sebi, mini contract on equity indices and volatility index will be a big hit among investors and will definitely generate significant trading volume. Mini contracts on equity indices will attract more retail participation while volatility index being a range bound product will also attract significant interest among investors. However, options with longer life tenure will be a big failure.?
