future of derivatives

7/27/2019 Future of Derivatives

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FUTURE OF DERIVATIVES


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Introduction to Tamesak

Holdings An Asia investment company Incorporated under the

Singapore Companies Act as an investment holdingcompany in 1974.

Owns and commercially manages investments incompanies previously held directly by the SingaporeGovernment.

Invests on commercial principles as an asset owner.

AAA/Aaa by Standard & Poors and Moodysrespectively


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Investment Themes

Transforming Economies

Growing Middle Income Populations

Deepening Comparative Advantages

Emerging Champions


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Introduction To Fullerton

Securities & Wealth Advisors

Wholly owned subsidary of Temasak

Holdings.

FSWA is a company registered under

Companies Act, 1956 as on 8th

feburary,2008.


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Fullerton Vision

To be distinctive financial services entity, providing thewidest range of unbiased financial solutions to customers.

Achieved through proprietary distribution network and

business partners.

Top class equity research.

High quality & welltrained employees.

Consistent service.

Cutting edge technology.

To provide superior financial planning and wealth advisory.


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Fullerton Mission

To create superior long termshareholder value in the financial

sector across emerging markets

Organic growth Acquire and transform

Improve productivity

Optimize capital

Risk- Reward balance


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Key Value Leadership

Great LeadershipPassionate

Balanced

Disciplined

Leaders in commercial/sme, mass consumer andmass self employed segments

Customercentric business models

Relationship v/s product positioning

Enabling management model and culture

Empowered within defined boundaries


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Deeply embedded in each market

and chosen segment

High market sharetop 3

Embedded the right values and behaviour

across the organisation.


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Board Of directors


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Organizational ChartPallav Sinha

MA & CEO

Ashok

MathurHead,South

Ashwinder

Raj Singh

head.,North& NCR

Punit Gupta

Head, WestSariq Hoda

Head,EAst

Mr. Ashutosh

Cluster

Head,Punjab

Baljinder

Singh

RM,

Acquistion

Mohit

Singla

Channel

Manager

Jitin Arora

RM, HNI

Munish

Goyal

BDM


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Group Companies

Bank Danamon in IndonesiaThe second largest private national bank and thefifth largest commercial bank in Indonesia, with a5% share of the domestic system loans and deposits

and 1,426 branches.

Fullerton India Credit Corporation

Established in December 2005, Fullerton Indiasbusiness model is community oriented, branchcentric and endeavors to build enduringrelationships with customers.


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Dunia

FFH entered into a strategicpartnership with Mubadala InvestmentCompany PJSC, Waha Capital PJSC

(formerly known as Oasis InternationalLeasing Company PJSC), and A.A.AlMoosa Enterprises LLC, with 40%ownership by FFH. Dunia FinanceLLC or Dunia, as it is morecommonly known, was created.


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Various departments Of FSWA,

Ludhiana

Wealth

Securities

DST(Direct Sales Team)


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Various Services Provided By

FSWA Financial Planning

Mutual Funds

Equities

Insurance

NRI Services

SWOT A l i f FSWA


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SWOT Analysis of FSWA,

Ludhiana

Strengths

Everyday technical and fundamental calls aremailed to customers before the market opens.

Every single thing happening in organization ismailed to head within seconds and it encouragesemployees to work.

Being MNC it has funds are available forexpansion. Therefore, No loan is required.


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Weakness

Employees sometimes use phones for personalcalling which doesnt come into notice and itmay increase expenses of company.

Opportunities Future expansion plans:- right now company

has only 2 offices in Punjab , its plan is to open15 new branches in Punjab by the end of this

financial year.

To tap untapped market by providing properknowledge to potential customers.


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Threats

Existing brokerage firms in market.

Being an MNC people dont know about this

company, so people may prefer visiting another

company and opening account.


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History Of Derivatives

The first organized commodity exchange cameinto existence in the early 1700s in Japan.

U. S. futures markets, was the creation of theChicago Board of Trade in 1848.

In 1865, CBOT listed the first exchangetraded

derivatives contract.


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In 1865, CBOT listed the first exchangetraded

derivatives contract.

The Chicago Mercantile Exchange (CME), was

formed in 1919, though it did exist before in

1874 under the names of Chicago ProduceExchange (CPE) and Chicago Egg and Butter

Board (CEBB).

The first financial futures to emerge were the

currency in 1972 in the US.


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The first foreign currency futures were traded on

May 16, 1972, on International Monetary Market

(IMM), a division of CME.

The first call and put options were invented by an

American financier, Russell Sage, in 1872.


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1991 Liberalisation process initiated

14 December

1995

NSE asked SEBI for permission to trade index futures.

18 November

1996

SEBI setup L.C.Gupta Committee to draft a policy framework for

index futures.

11 May 1998 L.C.Gupta Committee submitted report.

7 July 1999 RBI gave permission for OTC forward rate agreements (FRAs) and

interest rate swaps.

Indian Derivative Market


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24 May 2000 SIMEX chose Nifty for trading futures and options on an

Indian index.

25 May 2000 SEBI gave permission to NSE and BSE to do index

futures trading.

9 June 2000 Trading of BSE Sensex futures commenced at BSE.

12 June 2000 Trading of Nifty futures commenced at NSE.

25 September

2000

Nifty futures trading commenced at SGX.

2 June 2001 Individual Stock Options & Derivatives


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Derivative instruments are defined by

Securities Contract (Regulation) Act

include:-

A security derived from debt instruments,shares, secured / unsecured loan, risk

instruments or contracts for differences, or anyother form of security.

A contract that derives its value from the prices

/ index of prices underlying securities.


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Categories Of

Participants

Hedgers Speculators Arbitrageur


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Types Of Derivative Contracts

Futures Options Forwards

Swaps


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Forward Contract

A forward contract is a customizedcontract between the buyer and the

seller where settlement takes place on

a specific date in future at a price

agreed today.


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Futures Contract

A futures contract gives the holder the

right and the obligation to buy or sell, an

Asste at a certain time in future , itfollows daily settlement


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Options

A contract that gives the option holder theright but not the obligation to buy or sell

the underlying asset at a price, called the

strike price, during a period or on aspecific date in exchange for payment of a

premium is known as option.

Two Types Of Options Call Options

Put Options


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Swaps

Swaps are contracts to exchange cash(flows) on or before a specified future

date based on the underlying value of

currencies/exchange rates, bonds/interestrates, commodities, stocks or other assets.

Two Types Of Swaps

Interest Rate Swaps Currency Swaps


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Factors Contributing To

Growth Of Derivatives

Price Volatility

Globalization of Market

Technological advances

Advances in financial theories


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Title Of The Study

A Study on Future Of Derivativesin Ludhiana.


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Objectives Of Study

To study brokers experience in regard toderivatives.

To study investors perception towards

derivatives.

To study the risk involved in derivative

instruments.


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Limitations Of Study

Limited time:- The time available to conductthe study was only 2 months. It being a wide

topic had a limited time.

Aspect coverage:- Some of the aspects may not

be covered in my study.

Accuracy:- Some investors have filled forms

just for filling them. This may lead to less

accuracy in research.


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Research Methodology

Research methodology means theway in which the data has been

collected for the research project and

the way we would complete ourprospected task.


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Research design

Research design is the structure within whichresearch is conducted; it contains the blueprint

for the collection, measurement and analysis of

data.

Descriptive research design has been used as

in this research the perception of brokers and

investors in regard to derivatives has beenstudied.


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Samplingplan

Universe

Population

Sampling

unit

Sampling

frame

Sample

Size

SamplingTechnique


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Universe- All the people who are dealing inderivatives and were interested to deal inderivatives.

Population-

(i) All the brokers dealing in derivatives inLudhiana.

(ii) All the people dealing in derivatives orinterested in dealing, in Ludhiana.

Sampling Unit Every single person visitingAnsal plaza and Feroz Gandhi market and every

broker of Ludhiana Stock Exchange is sample unitin the report


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Sampling Frame - It represents the

elements of the target population.

Ludhiana City is the sampling frame for

this project.

Sample size- Sample size used in the

project is 50 (25 brokers and 25 investors).

Sampling Technique-Non Probability

technique i.econvenience sampling has

been used forcollecting data.


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Data collection

Primary DataSecondary Data

D A l i A d


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Data Analysis And

Interpretation

PART I

To Study The Brokers experience in

regard to Derivatives

(Table 4a 1) Percentage of


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(Table 4a.1) Percentage of

clients dealing in derivatives

(N=25)Percentage Of

Clients

Brokers response Percentage

0-20 14 56

20-40 7 28

40-60 2 8

60 & above 2 8

Total 25 100

(Graph 4a 2) Better mode of


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(Graph 4a.2) Better mode of

Investing keeping in account

profitability


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(Table 4a.3) Most preferred Mode

for investing

(n=30)

Options Number of

responses

Percentage

I ndex futures 11 36.67

Stock futures 12 40

I ndex options 3 10

Stock options 4 13.33

Total 30 100


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(Table 4a.4) Risk Perception of

brokers towards derivatives

Risk Perception Number of

responses

Percentage

H ighly Risky 22 88

Moderate Risk 3 12

Less Risky 0 0

Total 25 100

(Table 4a 5) Highest risk


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(Table 4a.5) Highest riskcarrying derivative

(n=29)Types of derivatives Number Ofresponses

Percentage

Equi ty Derivative 5 17.24

Commodity

derivative

22 75.86

Currency derivative 1 3.45

I nterest rate

derivative

1 3.45

Total 29 100


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(Graph 4a.6)

( N=25)

(Graph 4a.7) Returns on


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(Graph 4a.7) Returns onderivatives if compared with

Real Estate Returns(N=25)


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(Graph 4a.8)

(N=25)


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(Graph 4.9)

(N=25)


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PART II

To Study Investors Perception Towards

Derivatives.

(G h 4b 1) A l I


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(Graph 4b.1) Annual Income

range of respondents

(N=25)

(Graph 4b.2) Investment


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(Graph 4b.2) InvestmentOptions used by respondents

(n=50)


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(Graph 4b.3)

(N=25)

(G h 4b 4) F i


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(Graph 4b.4) Frequency in

dealing with derivatives

(n=9)

(Table 4b.5) Purpose for


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(Table 4b.5) Purpose forundertaking derivative

Contract(n=11)Purpose Number of

responses

Percentage

Hedging 7 63.64

Speculation 2 18.18

Risk Management 2 18.18

Arbitrage 0 0

Total 11 100

(Graph 4b 6) Most preferred


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(Graph 4b.6) Most preferred

derivatives

(n=13)

(Graph 4b 7) Percentage


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(Graph 4b.7) Percentage

Income invested in derivatives

(n=9)

(Table 4b 8) Perception of


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(Table 4b.8) Perception of

investors regarding Profits

(n=9)Options Number of

responses

Percentage

Mean=Total/Total

no. of respondents

0/9=0

Highly Profitable

+2

0 0

Profitable

+1

3 3

Neutral

0

4 0

Loss Making

-1

1 -1

Highly Loss

Making -2

1 -2

Total 9 0

(Table4b.9) Investors risk


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( )Perception for derivatives

(n=9)Risk Factor Number ofresponses

Percentage

Highly Risky 6 66.67

Moderate Risk 3 33.33

Less risky 0 0

Total 9 100


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(Graph 4b.10)

(n=9)

(Graph 4b.11) Reasons for not


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( p )increasing investment in

derivatives(n=4)

(Graph 4b.12) Suggesting


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( p ) gg gothers put their money in

derivatives(n=5)


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(Graph 4b.13)

(n=16)

(Table 4b 13) Reason for not


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(Table 4b.13) Reason for not

dealing in derivatives

(n=9)


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PART-III

Analyzing Average Daily Turnover At

NSE

(Graph 4c.1)Business Growth


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( p )in Derivatives segment Since

2000-2010

Findings


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Findings

Main factor that led to growth of derivatives arehigher return.

Stock Futures are most preferred for investingin derivatives.

Derivatives carry high risk factor and amongstthat commodity derivatives are the most risky

to trade due to high fluctuations.

Money invested in real estate would fetchhigher return compared to derivatives andwould carry less risk.


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Maximum people use derivative asHedging tool.

People already investing money throughderivatives would like to increase theirinvestments because they find it highlyprofitable.

Some people would prefer to invest their

money through derivatives if they areprovided with knowledge and a reliablebroker.

S ti


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Suggestions People with low investment and less knowledge

should not enter derivatives market.

SEBI should be more vigilant to check thevolatility triggered by operators.

One should invest for long term and that tooonly in blue chip companies.

One should always invest their money andshould not speculate because speculation cancause heavy losses.

If one wants to make money in stock market he

should invest gradually in cash segment.


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Conclusion According to responses given by brokers and

investors a conclusion can be attained thatthere is great market ahead for derivatives infuture.

As fifty percent of people are ready to takeknowledge and invest their money inderivatives, existing investors are ready toincrease their investments which is healthy signfor the markets.

Even average turnover at NSE has increasedover last 10 years which shows us trend that infuture there will be rise in derivatives trading.


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Thank you

future of derivatives

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