SEBI Board approves New Derivative Product

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 headed by Prof. M. Rammohan Rao is expected to finalize
its recommendations on suitable OTC derivative products for the Indian
markets. As soon as these recommendations are available, after due
consultation, the SEBI Board will take a decision on these products as
well.


Mumbai