Stock / Commodity Derivative Exchange:
India has several exchanges where derivatives—both stock and commodity—are traded. Here's an overview of the key exchanges for stock and commodity derivatives:
1. National Stock Exchange (NSE)
Stock Derivatives: The NSE is the largest and most popular exchange in India for trading in stock derivatives. It offers:
Index futures and options (e.g., Nifty 50, Nifty Bank)
Stock futures and options (contracts on individual stocks)
Currency Derivatives: NSE also provides a platform for currency derivatives.
2. Bombay Stock Exchange (BSE)
Stock Derivatives: Like NSE, BSE offers a wide range of stock futures and options contracts.
Index Derivatives: BSE has its own set of indices like Sensex, on which futures and options contracts are traded.
3. Multi Commodity Exchange (MCX)
Commodity Derivatives: MCX is the largest commodity exchange in India, where various commodities like gold, silver, crude oil, copper, and agricultural products can be traded in futures contracts.
4. National Commodity and Derivatives Exchange (NCDEX)
Commodity Derivatives: NCDEX focuses on agricultural commodity derivatives, offering contracts for wheat, sugar, spices, pulses, and other agri-products.
5. Metropolitan Stock Exchange of India (MSE)
Though smaller in comparison to NSE and BSE, MSE also offers stock, currency, and interest rate derivatives.
6. India International Exchange (India INX)
This exchange operates from the International Financial Services Centre (IFSC) at GIFT City and offers a platform for trading derivatives across multiple asset classes, including equity, commodity, and currency derivatives.
These exchanges are regulated by SEBI (Securities and Exchange Board of India), ensuring that derivative trading is well-supervised and follows regulatory guidelines.
Each exchange focuses on different markets, offering a range of derivative instruments suited for investors, traders, and hedgers alike.
Depositories:
In India, there are two primary depositories that provide the infrastructure for holding and transacting in securities electronically:
1. National Securities Depository Limited (NSDL)
Established: 1996
Promoted by: NSE, Industrial Development Bank of India (IDBI), and other leading financial institutions.
Functions:
NSDL allows investors to hold and transfer securities such as equities, bonds, debentures, and mutual fund units in an electronic (dematerialized) form.
It ensures the safekeeping and maintenance of ownership records of securities in a secure, electronic format.
It supports settlement of trades in securities, reducing the risk associated with holding physical certificates (like theft, damage, or forgery).
2. Central Depository Services Limited (CDSL)
Established: 1999
Promoted by: BSE, State Bank of India, Bank of India, HDFC Bank, and other financial institutions.
Functions:
CDSL also facilitates the holding and transferring of securities in a dematerialized format.
It offers services like Demat accounts, corporate actions (like dividends, stock splits, rights issues), and pledge of securities.
CDSL works similarly to NSDL but is more popular among brokers and investors linked to the BSE.
Key Services Provided by Depositories:
Dematerialization: Converting physical certificates into electronic form.
Rematerialization: Converting electronic securities back into physical certificates (though rare).
Settlement of trades: Ensuring the smooth transfer of ownership when securities are bought and sold.
Corporate benefits: Facilitating dividends, interest payments, and other corporate actions directly into the investor’s account.
Pledge and Hypothecation: Investors can pledge their securities to raise loans.
Depository Participants (DPs):
Depository services are provided through Depository Participants (DPs), which act as intermediaries between the investor and the depository (NSDL or CDSL). Banks, stockbrokers, and financial institutions typically serve as DPs, and investors need to open Demat accounts with these DPs to hold securities in electronic form.
These depositories have played a significant role in streamlining the Indian capital market by digitizing securities, reducing the risks of holding physical certificates, and ensuring faster and more efficient trading and settlement.