Shake Up In Market On Introduction Of Derivatives Usual

"Gradually when the instruments gain acceptence and investor participation increases the futures market takeoff," he said.

Delving deeper into the working of the futures market, he said that it is important that the regulator concentrate on Indian market conditions and lay down the regulations accordingly rather than blindly following world trend.

Prof Brenner listed out certain important benefits of having a vibrant futures market including portfolio substitution, hedge options on stocks (cash market), overcome regulatory/ institutional restriction , healthy speculation and most importantly exploiting index arbitrage oppurnities.

Some of the uses could become very crucial in the volatile market condition like the Indian market witnessed of late, he said.

 

Stressing the importance of having a calendar spread, a mechanism of timing your risk in relation to present market condition while buying futures, he informed the audience that institutional participation is crucial in this section of the market. He added that proper regulation should be immediately laid down for this purpose.

He said risk could arise in the futures market due to mispricing of the instruments, general lack of experience with derivatives, institutional restriction especially with regard to short selling. These factors have been a stumbling block worldwide and the same applies in Indian context.