INSUBCONTINENT EXCLUSIVE:
By Ameya Karve and Ashutosh JoshiIndia will make physical settlement of all equity derivatives contracts mandatory this year in a bid to
reduce volatility and reinvigorate process of borrowing and lending of stocks.
The Securities and Exchange Board of India, or Sebi, had
announced its plan to mandate physical settlement in April last year, without giving timeline
The market regulator said in a statement on Monday that change in rules will be staggered from April to October depending on market
capitalization of company.
The move may curb excessive speculation in a market where derivatives trading is about 30-times that of cash
market, while adding to short-term volatility around expiration of contracts, on last Thursday of every month
The ratio is second only to South Korea, Sebi said in a report in 2017.
Investors can use so-called securities lending and borrowing program
on major Indian bourses -- BSE Ltd
and National Stock Exchange of India Ltd
-- to offer idle shares through clearing houses and earn returns
equity contracts nearing expiry for month are carried forward to next month
Traders rolled over an average 71 percent of their futures linked to NSE Nifty 50 Index -- one of most traded contracts in country -- in
past six months, according to data compiled by Bloomberg.
Here are comments from some analysts and fund managers:Venkat Subramanian, Infina
new mechanisms for settlement
After process settles, stock-specific volatility around expiry would reduce as holders would be positioned much in advance for physical
with higher delivery volume in cash markets
