Nse’s Derivatives Market

The derivatives trading on the NSE commenced with S & P CNX Nifty Index futures on June. 12.2000. The trading in Index options commenced on June 4. 2001 and trading in options on individual securities commenced on July 2. 2001. Single stock futures were launched on November 9. 2001. Today, both in terms of volume and turnover. NSE., is the largest derivatives exchange in India. Currently, the derivatives contracts have a maximum of 3 Month expiration cycles. Three contracts are available for trading, with 1 month, 2 months and 3 months expiry. A New contract is introduced on the next trading day following the expiry of the near month contract.

PARTICIPANTS AND FUNCTIONS

NSE admits members on its derivatives segment in accordance with the rules and regulations of the exchange and the norms specified by SEBI. NSE.. follows 2-tier membership structure stipulated by SEBI to enable wider participation. Those interested in taking membership on F&O segment are required to take membership of CM and F&O segment or CM. WDM and F&O segment. Trading and clearing members are admitted seperately. Essentially, a clearing member (CM) does clearing for all his trading members (TM), undertakes risk management and performs actual settlement. There are three types of CM s:

SELF CLEARING MEMBER: A Self clearing member clears and settles trades executed by him only either on his own account or on account of his clients.

TRADING MEMBER CLEARING MEMBER:

Trading Member clearing Member is a clearing member who is also a Trading Member. Trading Member Clearing Member may clear and settle his own proprietary trades and client’s trades as well as clear and settle for other Trading Members.

PROFESSIONAL CLEARING MEMBER: Professional clearing Member is a clearing member who is not a Trading Member. Typically, banks or custodians could become a professional clearing member and clear and settle for Trading Members.

The Trading Member Clearing Member and the Professional Clearing Member are required to bring in additional security deposit in respect of every Trading Member whose trades they undertake to clear and Settle.

 

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