L C Gupta Panel Favours Index-Based Derivatives

The Sebi-appointed L C Gupta committee on derivatives held the view that the Indian market is prepared for index-based futures. However, the bringing in of interest-rates futures will not be top priority, the panel members opined.

The committee yesterday met the various players and the potential users of the new instrument for a fresh round of dialogues.

The various players in the meeting included HDFC Bank, ANZ Bank, BZW UTI Securities among others.

At this stage it is clear that we have to introduce the index-based futures. We also discussed the need for interest-rates futures and also whether such an instrument was needed at this moment. This issue was discussed when we met the bankers and it was debated whether this is right opportunity to introduce interest rate futures, said Gupta. However, the introduction to interest-rate futures is not high on the priority, he added.

It is learnt that index-based futures will be introduced on Nifty and not BSE-100 index.

According to Gupta, the majority of market players have expressed their willingness for the introduction of derivatives as there is no hedging mechanism available in the market currently. He further informed that the most of the players have opted for index-based futures.

This meeting with the market players was held to understand the feel of the market, Gupta said. The committee held a series of discussions with brokers, mutual funds, banks and financial institutions and merchant bankers.

He categorically denied that there was any opposition to derivatives trading from the broking community. There was no opposition from the brokers, at least from those who attended the meeting yesterday, Gupta said.

Meanwhile, Price Waterhouse has submitted a dissent note to the sub-committee which prepared the draft report.

Gupta also informed that the regulator is in the process of analysing the responses sent by the market players to the 30-point Sebi questionnaire. The committee will be holding its regular meeting today and the draft prepared by the sub-committee is expected to the taken up.