SEBI approves derivatives trading on VIX by NSE

Business

oi-Roshni

By Roshni Agarwal

Published: Tuesday, January 21, 2014, 14:31 [IST]

Securities and Exchange Board of India (SEBI) has approved an NSE proposal to commence derivatives trading in Volatility Index or VIX. With this go-ahead by the capital market regulator, National Stock Exchange shall introduce futures and options trades in the index. To know about VIX click here.

The exchange has been long demanding the approval of SEBI to allow it to start derivatives trading on VIX. But, citing grounds that not many futures and options products in the market shall prove beneficial for retail investors, SEBI has since then now approved NSE to go ahead with its long-standing wish. Further, though SEBI has not granted its approval to the bourse, NSE has been provided with live India VIX values since a long time.

As suggested in one of the business dailies, futures contract on volatility index or India VIX shall have 3-weekly contracts. The minimum lot size as stipulated for the futures contract is stipulated to be for Rs. 10 lakhs and the contract shall be settled in cash like other derivatives contract. Also, a new contract shall be made available every week for trading.

VIX which is a measure of volatility in the stock market of a particular economy was introduced for the first time by the Chicago Board of Options Exchange for the stock markets in the US in the year 1993. Trading on VIX is popular globally and nod for derivatives trading on VIX underlines the regulator's approach in allowing trades in even complex derivatives instrument. The nod for trading on VIX follows the regulator's approval for interest rate futures trading on the different bourses which commenced on the MCX-SX yesterday and NSE today.

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