SMDRP/DC/CIR- 7/01
June 20, 2001
To,
The Chief Executive Officer/ Managing Director of Derivative Segment of NSE & BSE
and their Clearing House / Corporation.
Dear Sir,
Sub: Risk containment measures for Stock Option
This is in continuation of SEBI Circular No. IES/DC/CIR-4/99 dated July 28, 1999 & Circular No. IES/DC/CIR-5/00 dated December 11, 2000 wherein SEBI had laid down the risk containment measures for Exchange traded Index Futures and Index Option Contracts.
SEBI has setup a ‘ Technical Group’ headed by Prof. J.R Varma to prescribe risk containment measures for new derivative products. The group has recommended the introduction of Exchange traded Options on Stocks, which is also in conformity with the sequence of introduction of derivative products recommended by Dr. L.C Gupta Committee.
The ‘Technical Group’ has recommended the risk containment measure for Exchange traded Options on Stocks. While SEBI would not mandate any particular risk management product, the framework shall be consistent with the risk management guidelines mandated by the L. C. Gupta Committee. The Exchanges are free to decide whether they want to adopt any of the risk management models available globally or else may like to develop their own models for risk management.
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