BSE to start delivery-based F&O trade from tomorrow

Leading bourse Bombay Stock Exchange (BSE) today said it will start trading in delivery-based stock futures and options from tomorrow, pursuant to which delivery will be mandatory for all the stock derivative contracts.

However, the cash settlement will continue in index futures and options contracts, the BSE said in a circular.

Market regulator Sebi in July 2010 had permitted stock exchanges flexibility in providing physical or cash settlement for their futures and options trading.

BSE's decision to start trading with physical settlement is seen as an attempt to revive its derivatives market share, where it at present has only negligible presence and the market is dominated by rival NSE.

BSE said that "effective February 1, 2011, trading on all existing single stock futures & options contracts expiring on or after April 13, 2011 (the settlement expiry date for the month of April) will be delivery-based".

However, all single stock futures & options contracts expiring on February 10, 2011 and March 17, 2011 (the settlement expiry dates for the months of February and March) will continue to be settled by cash.

The BSE said that the final settlement would be done three days after the expiry of the contract.

The bourse said that all open positions in single stock futures contract will result in delivery obligations at expiry.

For single stock options contracts, the exercise of all open positions will be solely at the discretion of the buyer on the expiry day.