Varma panel to give push to derivatives market

By Our Staff Correspondent

MUMBAI, AUG. 2. An advisory group under the chairmanship of Prof. J. R. Varma is to be set up to consider the issues concerning the growth, development and regulation of the derivatives market. The group will have persons from stock exchanges, broking community, institutions, professionals, mutual funds and academicians. A sub-group would be constituted to suggest uniform mechanism for adjustment in the option contracts at the time of corporate actions.

This decision was taken at a meeting of the derivative stock exchanges which met to identify measures to encourage higher volumes and liquidity on the derivatives market, according to a Securities and Exchange Board of India (SEBI) release.

The group was of the view that investor education should be intensified and it was decided that focused programme on investor education would be conducted jointly by the SEBI, the NSE and the BSE in the four metros to begin with. It was also noted that institutional investors are not active in the derivatives market and a meeting will be convened to identify the issues, if any.

The group also felt that physical settlement of the option should commence as quickly as possible as this would help integrate both cash and derivatives market, better price discovery and higher volumes. The physical settlement was originally proposed to commence after six months of the introduction of stock options.

Subsidiaries of stock exchanges are being permitted to become clearing as well as trading members in the derivatives market and all the risk parameters as laid down by SEBI would be applicable to the trades of these subsidiaries.

This would enable the members of the small stock exchanges to participate in the derivatives market through the subsidiary route.

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Section  : Business
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