Futures Exchanges in India

An Exchange designs a contract, which alone would be traded on the Exchange. The contract is not capable of being modified by participants, i.e., it is standardized.

The Exchange also provides a trading platform, which converges the bids and offers emanating from geographically dispersed locations.

This creates competitive conditions for trading. The Exchange also provides facilities for clearing, settlement, arbitration facilities.

The Exchange may also provide a financially secure environment by putting in place suitable risk management mechanisms (margining system etc.), and guaranteeing performance of contract through the process of novation.

The National Stock Exchange of India Limited (NSE) commenced trading in derivatives with the launch of index futures on June 12, 2000.

The futures contracts are based on the popular benchmark S&P CNX Nifty Index.

The Exchange introduced trading in Index Options (also based on Nifty) on June 4, 2001.

NSE also became the first exchange to launch trading in options on individual securities from July 2, 2001.

Futures on individual securities were introduced on November 9, 2001. Futures and Options on individual securities are available on 216 securities stipulated by SEBI.

The Exchange has also introduced trading in Futures and Options contracts based on CNX-IT, BANK NIFTY, and NIFTY MIDCAP 50 indices.

Bombay Stock Exchange (BSE) created history on June 9, 2000, by launching the first Exchange-traded Index Derivative Contract in India, i.e., futures on the capital market benchmark index – the BSE Sensex.

On October 1, 2008, BSE launched its currency derivatives segment in dollar-rupee currency futures as the exchange-traded currency futures contracts facilitate easy access, increased transparency, efficient price discovery, better counterparty credit risk management, wider participation, and reduced transaction costs.

BSE re-launched its Derivatives Segment by enabling trading of Index and Stock Futures on its BOLT Terminal.

The change was in response to requests from trading members for a common front end from which equities and equity derivatives could be traded.

The change will enable a trader to trade in cash scrips and futures products through BOLT TWS/ IM.

The five sectoral indices that are presently available for F&O are BSE TECK, BSE FMCG, BSE Metal, BSE Bankex, and BSE Oil & Gas.

At present, The Government of India has granted permanent recognition to three national level multi-commodity exchanges, namely,

  1. Multi-commodity Exchange of India Limited (MCX) Mumbai,
  2. National Commodity and Derivatives Exchange Limited (NCDEX), Mumbai and
  3. National Multi-commodity Exchange of India Limited (NMCE) Ahmedabad.

These online national commodity exchanges have been organized for conducting forward/futures trading activities in all commodities, to which section 15 of the Forward Contracts (Regulation) Act, 1952 is applicable, and the other commodities neither listed under section 17 nor section 15 of the said Act, subject to the approval of the Forward Markets Commission, Government of India.

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