Sebi Sets Up Derivatives Trading Cell

In a move aimed at introducing derivatives trading in the country, the Securities and Exchange Board of India (Sebi) has set up a special division at its Mumbai office to develop the derivatives market. The special derivatives cell will be headed by the N Parakh, who was earlier the division chief in the secondary market.

The three-member cell will be exclusively looking into various issues relating to introduction of derivatives trading in the country. Parakh will be assisted by two others in preparing the ground work of derivatives trading in the country.

The market regulators move comes in the wake of the L C Gupta's recommendation to this effect. The committee in its draft report had recommended the setting up of a separate cell (or board) in Sebi to help develop the derivatives market in India.

 

There is still uncertainty on whether futures trading can be introduced, as the government has yet not made its stance clear on the issue. The issue is whether the index be treated as a security or not. Sources within Sebi have informed that the government has, in a letter to the market regulator, clarified that the index can be treated as as security.

However, it is not yet clear whether this letter can be used as a notification or the government needs to issue fresh new notifications to this effect.

The committee in its last meeting held in December had decided that the even the exchange level rules and bye-laws for derivatives trading be drafted by the Gupta committee. The panel is believed to taking cue from the detailed draft prepared by the National Stock Exchange (NSE) earlier.

Sources said the committee members are currently busy preparing the model by-laws, and is expected that these will be ready by mid-February. Once the model bye-laws are ready it will be later put before the committee to discussion.

While, the Sebi chairman had earlier stated that derivatives trading will be introduced in the country well within this fiscal, the lag in finalising the report is expected to delay derivatives trading.