The Stock Exchange, Mumbai will be launching single stock futures tomorrow in line with the recommendation of SEBI Advisory Committee. The single stock futures contract will be available on 31 stocks permitted by SEBI, on which option contract are already trading. These contracts will be available for a period of one, two and three months maturity and they will be cash settled. The market lot for single stock futures will be the same as in case of stock options. The risk management mechanism approved by the SEBI Board will be applicable. A portfolio based margining model would be adopted which will take an integrated view of the risk involved in the portfolio of each individual client comprising of his positions in all the derivatives contract traded on Derivatives Segment.

The introduction of single stock futures completes the full family of derivatives products in India. Infact the introduction of this product will place India among a few countries that allows trading on single stock futures. It is expected that the introduction of leveraged product like single stock futures will inject the much needed liquidity into the Indian capital market as deferral products allow traders to carry forward their position while taking a more long term view of the market. This product will throw open hedging and arbitrage opportunities to all market participants like mutual funds, retail and institutional investors. Since there are a number of products based on the same underlying, there will be arbitrage opportunities between the underlying cash market, single stock futures and stock options. The derivative products like stock options may also receive a boost as traders will now find an opportunity to hedge their open positions in options through trading in futures. Thus the futures and options can play a complementary role. Price discovery may be enhanced even more with the addition of this product.

In a multi product environment, it becomes very important to have a safe and easy to use trading system. BSE trading system gives real time online clientwise margin. This enables better risk management at the brokers's end. BSE trading system also has a unique feature wherein a broker can restrict his traders from dealing in certain products. Thus it enables a broker to install his trading terminals at various places with a much higher comfort level.

Dr. Sanjiv Mehta
Chief Executive Officer
BSE Derivatives Segment

November 8, 2001