The exchange has decided to set up an entire derivatives segment to be headed by professionals. The segment will be headed by a director who would be assisted by a general manager. A clutch of management trainees are also proposed to be hired.

It has also set up a committee comprising six to seven broker members to chalk out the strategy for introduction of derivatives. When contacted, BSE president, JC Parekh, said that the exchange would kick-off derivatives in the form of index based futures on the lines of the LC Gupta committee recommendations. Later the exchange will try to introduce a mix of indigenous products which were prevalent in earlier days before they were banned in 1952 and modern products in use in developed markets.

BSE whichhad been advocating badla as the effective hedging instrument and describing derivatives as "dangerous instruments", had off late been giving hints of it "considering" introduction of derivatives in due course.

Sources indicated that a section of the BSE top brass feels that it makes sense to follow the modern practices and introduce the latest such derivatives products as outlined by the LC Gupta committee. The matter had come up at the meeting of the governing board earlier this week.

The LC Gupta committee has recommended the phased introduction of derivatives starting with index-based futures. The committee has also recommended that an exchange would need to set up a separate derivatives segment which would be headed by a person who is not an active broker. The latter point was contested by the former BSE president, MG Damani. But following the recommendation of the committee the exchange has decided to appoint a professional to head the segment.

``The next step in the evolution of the capitalmarkets is introduction of derivative instruments like future, options etc. In keeping with our leadership position, we are setting up a derivatives segment to exploit the imminent opportunities in this area", said an exchange source.

The source added that the role cut out for the new incumbents will be to study derivative products, drawing up a formal business plan, selection of international and local consultants, managing the operations and bringing the project on-stream for the exchange.

According to sources, the change in approach could have come from demands from brokers to adopt derivatives in line with the move being adopted by rival National Stock Exchange (NSE).

It is felt that with badla volumes already propping up the traded volumes at the bourse, in fact bringing it very close to the turnover at NSE, introduction of derivatives will lead to the exchange not losing out in business to NSE and may even lend an opportunity to overtake the rival bourse.