The Bombay Stock Exchange (BSE) will kick off trading in index options from early-June. The exchange will first commence mock trades from May 19, said Sanjeev Mehta, chief executive officer, derivatives segment, Bombay Stock Exchange.
"We are also gearing up to launch options trading in individual stocks by July as mandated by the Sebi," Mehta said, "The volumes in the options segment are expected to pick up by early next year and subsequently price discovery will shift to derivatives rather than the cash segment."
BSE has 200 members in the derivative segment under various categories such as professional clearing member, trading and clearing member, trading member and limited trading member. It has recently tied up with Chicago Mercantile Exchange to adopt its standard portfolio analysis of risk (SPAN) system for calculating margin requirements and managing risk.. SPAN is a risk-based portfolio-approach for computing performance bond (margin) requirements for portfolio of futures, options and other derivative and non-derivative instruments.
"With the adoption of SPAN, BSE will take a quantum leap in the field of risk management and will be on par with international standards," Mehta said. "We intend to use SPAN not only for risk management of derivatives, but also for recognising risk offsets between the cash and the derivatives markets in the future," he said.
SPAN has almost become an industry-standard, adopted by more than 30 exchanges and clearing organisations world-wide including Tokyo Stock Exchange, Singapore Exchange and Hong Kong Futures Exchange.
