Sebi clears new derivative products

Sebi board has approved launch of new derivative products to provide investors a wide range of risk mitigation products and create more activity...

Sebi board has approved launch of new derivative products to provide investors a wide range of risk mitigation products and create more activity in the onshore market.

As a step intended to progressively encourage markets to move onshore, the Sebi board at its meeting in Chennai on Wednesday approved introduction of new derivative products for the Indian market based on the interim recommendations made by the Sebi Committee on Derivatives headed by M Rammohan Rao. 8220;The products will be introduced under suitable regulatory framework in due consultation wherever necessary with other regulatory authorities,8221; Sebi said.

These new derivative products will be relating to mini-contracts on equity indices, options with longer life/tenure, volatility index and F038;O contracts, options on futures, bond indices and F038;O contracts; exchange-traded currency foreign exchange futures 038; options and 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. 8220;These products are expected to bring transactions based on private-synthetic products to an exchange-traded transparent mechanism with appropriate regulatory supervision,8221; Sebi said.

The board also mandated a wider consultative process be followed before finalising 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 Rao is expected to finalise 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.

NEW PRODUCTS

8226;Mini-contracts on equity indices

8226;Options with longer life/tenure

8226;Volatility index and F038;O contracts

8226;Options on futures

8226;Bond indices and F038;O contracts

8226;Exchange-traded currency foreign exchange futures 038; options

8226;Introduction of exchange-traded products to cater to different investment strategies