Types of Financial Derivative

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Futures and Options in India BY: YOGIN VORA ON MARCH 25, 2010 NO COMMENT * Options Trading * Options Trade * Derivatives Trade * Trading in shares The Indian capital market has witness impressive growth and qualitative changes, especially over the last two decades. In the fifties, sixties and most of the seventies, it was in a dormant stage when the investors were generally not familiar with, or inclined towards, the corporate securities. During this time, only few companies accessed the capital market. As a consequence, trading volumes were low during these years. The process of liberalization of the Indian economy since the early nineties has contributed to changes in the capital market scenario. The entry of…show more content…
The Badla system was banned in December 1993 by the market regulator, SEBI, presumably because it led to excessive speculation and/or its misuse. Based on the recommendations of the G S Patel committee that the SEBI had set up, a new carry forward trading system was introduced in January 1996. However, the system did not fond much favour with the broking and investing community. The revised carry forward system entails a number of restrictions which have made it unattractive. * Limits on the Carry Forward Transactions * Margins * Limited Carry Forward * Cumbersome Reporting Requirement There were voices for relaxations in the stringent conditions laid down in the revised carry forward scheme from time to time and even demands for reviving the old badla system. The re-introduction of Badla trading was suggested in some quarters to be key to the revival of the capital market on account of their deep faith in the ingenuity of the system which simultaneously facilitates hare financing, share lending and carry forward. * Badla: Operation and Rationale We may look the modus operandi of badla, which has been prevalent I the Indian markets. Under the bye-laws of the stock exchanges, a contract in specified shares can be for a. Spot delivery b. For hand delivery c. For special delivery d. For the settlement Unless otherwise stipulated, when entering into the contract, a contract
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