SEBI relaxes settlement norms for stock derivatives
15 Jul 2010
The Securities and Exchange Board of India (SEBI) in consultation with the stock exchanges has decided to relax the settlement norms for derivatives trading on stock exchanges.
Accordingly, stock exchanges may opt for 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.
Alternatively, they may also follow cash settlement system for stock options and physical settlement for stock futures or physical settlement for stock options and cash settlement for stock futures.
The new rules are based on the recommendations of the Derivatives Market Review Committee regarding settlement of stock options and stock futures contracts respectively, SEBI said in a release.
Stock exchanges have to 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.
The settlement mechanism will be decided by the stock exchanges in consultation with the depositories.