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PRESS TRUST OF INDIA
New Delhi, Dec 8: A market for derivative trading in Indian shares is developing overseas with major FIIs facilitating investors to trade in the instrument. Currently, derivatives trading (trading of contracts for a future date at a predetermined price) in shares is not allowed in India as it requires a amendment in the Securities Contracts Regulation Act (SCRA), expected to come up in the ongoing session of the parliament.
"FIIs like Jardine Fleming and Morgan Stanley are acting as counterparties to investors abroad to trade in both futures and options in Indian shares," Vikrant Raina, executive director (Asia) of Goldman Sachs told PTI. Raina said the development would supplement derivatives trading when it is introduced in the country.
Share derivatives are financial contracts which derive their value from underlying shares prices in stock markets. When contacted, a spokesperson for Morgan Stanly denied that the FII was allowing foreign investors abroad to trade in derivatives of Indianshares.
Being a complicated financial instrument, trading in derivatives would be first allowed only in index-futures by the stock market watchdog, Securities and Exchange Board of India (Sebi) where investors could trade in futures trading in stock market indices. Trading in derivatives of individual stocks would be allowed only after investors are familiar with the trading in index-based derivatives, as per the Sebi plan. Though derivatives trading is popular abroad, in India its introduction was delayed as both Sebi and government were of the opinion that investors should be taught the intricacies of tthe system before permitting them to take part in it.
"Foreign investors already are familiar with derivatives and are more comfortable trading in them," vice-chairman of Kotak Mahindra, Uday S Kotak said adding investors overseas are trading both in index-based derivatives and derivatives in individual Indian stocks.
As per the Sebi rules, trading in derivatives in Indian stocks and indices is illegaland the regulator wants derivatives to develop in India rather than abroad. Derivatives comprise of future and options. In the futures contract, two parties agree to trade at some future date, at a stated price and quantity and no money changes hands at the time of signing of deal.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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This story was printed from Net Express located at http://www.expressindia.com. Net Express provides a portal to India, with news from The Indian Express and The Financial Express along with sites on travel and tourism, the entertainment industry, the power sector, the environment and much more.
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