PARTICIPANTS IN THE DERIVATIVE MARKETS IN INDIA (A study on Hedgers Speculators Arbitrageurs)

Abstract

Financial derivatives are difficult to trace out origin of futures trading since it is not clearly established as to where and when the first forward market came into existence. Historically, it is evident that futures markets were developed after the development of forward markets. It is believed that the forward trading was in existence during 12th century in England and France. Forward trading in rice was started in 17th century in Japan, known as Cho-at-Mai a kind (rice trade-on-book) concentrated around Dojima in Osaka, later on the trade in rice grew with a high degree of standardization. In 1730, this market got official recognition from the Tokugawa Shogurate. As such, the Dojima rice market became the first futures market in the sense that it was registered on organized exchange with the standardized trading norms. The butter and eggs dealers of Chicago Produce Exchange joined hands in 1898 to form the Chicago Mercantile Exchange for futures trading. The exchange provided a futures market for many commodities including pork bellies (1961), live cattle (1964), live hogs (1966), and feeder cattle (1971). The International Monetary Market was formed as a division of the Chicago Mercantile Exchange in 1972 for futures trading in foreign currencies. In 1982, it introduced a futures contract on the S&P 500 Stock Index. Many other exchanges throughout the world now trade futures contracts. Among these are the Chicago Rice and Cotton Exchange, the New York Futures Exchange, the London International Financial Futures Exchange, the Toronto Futures Exchange and the Singapore International Monetary Exchange. During 1980’s, markets developed for options in foreign exchange, options on stock indices, and options on futures contracts.