Item Derviatives in India
Asset Derivatives Industry in India: Development,
Control and Long term Prospects
The Indian economy is witnessing a mini trend in commodity derivatives and risk management. Item options trading and cash negotiation of commodity futures was banned since 1952 and until 2002 commodity derivatives market was virtually non-existent, except several negligible activity on an OTC basis. Right now in September 2005, the region has several national level electronic exchanges and twenty-one regional exchanges for trading commodity derivatives. As many as 80 (80) goods have been allowed for derivatives trading. The value of trading has been thriving and is very likely to cross the $ you Trillion indicate in 2006 and, if every goes well, seems to be set to touch $5 Trillion within a few years. Chequred Background
The history of organized item derivatives in India goes back to the nineteenth century if the Cotton Operate Association began futures trading in 1875, barely of a decade after the commodity derivatives started in Chicago, il. Over time the derivatives industry developed in numerous other products in India. Following organic cotton, derivatives trading started in oilseeds in Bombay (1900), uncooked jute and jute items in Calcutta (1912), wheat or grain in Hapur (1913) in addition to Bullion in Bombay (1920). However , many feared that derivatives fuelled unnecessary supposition in essential commodities, and were detrimental to the healthful functioning with the markets intended for the underlying commodities, and hence to the maqui berry farmers. With a view to restricting speculative activity in cotton industry, the Government of Bombay forbidden options business in 1939. Later in 1943, forwards trading was prohibited in oilseeds and several other products including food-grains, spices, plant oils, sugars and towel. After Self-reliance, the Legislative house passed Frontward Contracts (Regulation) Act, 1952 which regulated forward agreements in commodities all over India. The Work applies to products, which are thought as any movable property aside from security, forex and useful claims. The Act forbidden options trading in goods along with funds settlements of forward trading, rendering a crushing whack to the commodity derivatives market. Under the Take action, only individuals associations/exchanges, which can be granted identification by the Government, are allowed to coordinate forward trading in regulated commodities. The Act envisages three-tier rules: (i) The Exchange which organizes forwards trading in commodities can easily regulate trading on a everyday basis; (ii) the Forwards Markets Commission payment provides regulatory oversight underneath the powers delegated to this by the central Government, and (iii) the Central Govt - Division of Customer Affairs, Ministry of Buyer Affairs, Meals and Open public Distribution -- is the best regulatory authority. The previously shaken commodity derivatives industry got a crushing whack when in 1960s, pursuing several years of severe draughts that pressured many farmers to arrears on ahead contracts (and even triggered some suicides), forward trading was banned in many goods considered main or important. As a result, commodities derivative market segments dismantled and went subterranean where to some degree they ongoing as OVER-THE-COUNTER contracts at negligible volumes of prints. Much later, during the 1970s and eighties the Government calm forward trading rules for some commodities, however the market could never restore the dropped volumes. Difference in Government Insurance plan
After the Of india economy set out upon the liberalization and globalisation in 1990, the federal government set up a Committee in 1993 to measure the position of futures trading. The Committee (headed by Prof. K. And. Kabra) advised allowing options contracts trading in 17 asset groups. It also recommended strengthening of the Forward Markets Commission rate, and certain amendments to Forward Deals (Regulation) Act 1952, specifically allowing options trading in merchandise and sign up of agents with Forwards Markets...
Recommendations: * Aggarwal Ashish (2003): Bigger Than Stocks? Businessworld, Sept 15, 2003.
* Ahuja D. L. (2005): Managing Forex trading Risk with Derivatives, daily news presented in the International Meeting of Asia-pacific Association of Derivatives (APAD) held at IIM-Bangalore, 27-30 July 2005.
* Duncan Richard, Gardening Futures and Options, 1999, McGraw Hillside, New york.
5. Government of India (2003): Report of the Task Power on Convergence of investments and Commodity Derivatives Markets (Chairman, Wajahat Habibullah).
* Government of India (1952): Forward Contracts (Regulation) Take action 1952.
2. Nair C. K. G. (2004): Product Futures Market segments in India: Ready for " Take offвЂќ?
* Thomas Susan (2003): Agricultural Item Markets in India; Insurance plan Issues for Growth, Indira Gandhi Institute for Development Research, Mumbai.
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