Saturday, August 14, 2010

PHYSICAL SETTLEMENT OF STOCK DERIVATIVES

Based on the recommendations of the Derivatives Market Review Committee and in consultation with Stock Exchanges (BSE and NSEIL), it has been decided to provide flexibility to Stock Exchanges to offer:


  • Cash settlement (settlement by payment of differences) for both stock options and stock futures; or
  • Physical settlement (settlement by delivery of underlying stock) for both stock options and stock futures; or
  • Cash settlement for stock options and physical settlement for stock futures; or
  • Physical settlement for stock options and cash settlement for stock futures.

A Stock Exchange may introduce physical settlement in a phased manner. On introduction, however,
physical settlement for all stock options and/or all stock futures, as the case may be, must be completed within six months.

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