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2.1.1 DEFINITION:
Understanding the word itself, Derivatives is a key to mastery
of the topic. The word originates in mathematics and refers to a
variable, which has been derived from another variable. For example,
a measure of weight in pound could be derived from a measure of
weight in kilograms by multiplying by two.
In financial sense, these are contracts that derive their value
from some underlying asset. Without the underlying product and
market it would have no independent existence. Underlying asset can
be a Stock, Bond, Currency, Index or a Commodity. Some one may
take an interest in the derivative products without having an interest
in the underlying product market, but the two are always related and
may therefore interact with each other.
2.1.3 RATIONALE
BEHIND
THE
DEVELOPMENT
DERIVATIVES:
Holding portfolio of securities is associated with the risk of the
possibility that the investor may realize his returns, which would be
much lesser than what he expected to get. There are various
influences, which affect the returns.
OF
There are other types of influences, which are external to the firm,
cannot be controlled, and they are termed as systematic risks.
Those are
Economic
Political
1. Hedgers
2. Speculators
3. Arbitrageurs
Hedgers: The party, which manages the risk, is known as Hedger.
Hedgers seek to protect themselves against price changes in a
commodity in which they have an interest.
Speculators: They are traders with a view and objective of making
profits. They are willing to take risks and they bet upon whether the
markets would go up or come down. Arbitrageurs: Risk less profit
making is the prime goal of arbitrageurs. They could be making
money even with out putting their own money in, and such
opportunities often come up in the market but last for very short time
frames. They are specialized in making purchases and sales in
different markets at the same time and profits by the difference in
prices between the two centers.
or
counterparty
risk,
it
differs
with
different
instruments.
movements
of
prices
of
the
underlying
asset/instrument.
Contract Periods:
At any point of time there will be always be available nearly
3months contract periods in Indian Markets. These were
1) Near Month
2) Next Month
3) Far Month
For example in the month of September 2007 one can enter
into September futures contract or October futures contract or
November futures contract. The last Thursday of the month specified
in the contract shall be the final settlement date for the contract at
both NSE as well as BSE; it is also known as Expiry Date.
Settlement:
The settlement of all derivative contracts is in cash mode.
There is daily as well as final settlement. Outstanding positions of a
contract can remain open till the last Thursday of that month. As long
as the position is open, the same will be marked to market at the
daily settlement price, the difference will be credited or debited
accordingly and the position shall be brought forward to the next day
at the daily settlement price. Any position which remains open at the
end of the final settlement day (i.e. last Thursday) shall be closed out
by the exchange at the final settlement price which will be the closing
spot value of the underlying asset.
Margins:
There are two types of margins collected on the open position,
viz., initial margin which is collected upfront which is named as SPAN
MARGIN and mark to market margin, which is to be paid on next day.
As per SEBI guidelines it is mandatory for clients to give margins,
failing in which the outstanding positions are required to be closed
out.
Exposure limit:
The national value of gross open positions at any point in time
for index futures and short index option contract shall not exceed
33.33 times the liquid net worth of a clearing member. In case of
futures and options contract on stocks the notional value of futures
contracts and short option position any time shall not exceed 20
times the liquid net worth of the member. Therefore, 3 percent
notional value of gross open position in index futures and short index
options contracts, and 5 percent of notional value of futures and short
option position in stocks is additionally adjusted from the liquid net
worth of a clearing member on a real time basis.
Position limit:
It refers to the maximum no of derivatives contracts on the
same underlying security that one can hold or control. Position limits
are imposed with a view to detect concentration of position and
market manipulation. The position limits are applicable on the
cumulative combined position in all the derivatives contracts on the
same underlying at an exchange. Position limits are imposed at the
customer level, clearing member level and market levels are
different.
Regulatory Framework:
Considering the constraints in infrastructure facilities the
existing stock exchanges are permitted to trade derivatives subject to
the following conditions:
The
exchange
must
have
an
online
surveillance
existing
automatically
segment
segment
of
become
the
the
exchange
members
of
will
not
derivatives
The
derivatives
market
should
have
separate
Of course, yes. Stock brokers are governed by SEBI Act, 1992, Securities Contracts
(Regulation) Act, 1956, Securities and Exchange Board of India [SEBI (Stock brokers
and Sub brokers) Rules and Regulations, 1992], Rules, Regulations and Bye laws of
stock exchange of which he is a member as well as various directives of SEBI and stock
exchange issued from time to time. Every stock broker is required to be a member of a
stock exchange as well as registered with SEBI. Examine the SEBI registration number
and other relevant details can be found out from the registration certificate issued by
SEBI.
How do I know whether a broker is registered or not?
Every broker displays registration details on their website and on all the official
documents. You can confirm the registration details on SEBI website. The SEBI
website provides the details of all registered brokers. A brokers registration number
begins with the letters INB and that of a sub broker with the letters INS.
What are the documents to be signed with stock broker?
Before start of trading with a stock broker, you are required to furnish your details such
as name, address, proof of address, etc. and execute a broker client agreement. You are
also entitled to a document called Risk Disclosure Document, which would give you a
fair idea about the risks associated with securities market. You need to go through all
these documents carefully.
SUB BROKERS
According to the BSE website Sub-broker means any person not being a member of
a Stock Exchange who acts on behalf of a member-broker as an agent or otherwise for
assisting the investors in buying, selling or dealing in securities through such memberbrokers.
All Sub-brokers are required to obtain a Certificate of Registration from SEBI without
which they are not permitted to deal in securities. SEBI has directed that no broker shall
deal with a person who is acting as a sub-broker unless he is registered with SEBI and it
shall be the responsibility of the member-broker to ensure that his clients are not acting
in the capacity of a sub-broker unless they are registered with SEBI as a sub-broker.
It is mandatory for member-brokers to enter into an agreement with all the sub-brokers.
The agreement lays down the rights and responsibilities of member-brokers as well as
sub-brokers.
1.
2.
3.
CHARGES
The fees charged for DP services differ across the industry. Though the rates change,
the charges normally go under the following heads:
1.Account
opening
2.Annual
maintenance
3.Transaction
Besides the above, depository participants also charge service tax as applicable.
fee
fee
fee
DOCUMENTS REQUIRED
For opening a demat account one needs to provide a set of documents to the agent.
They are:
1. Duly completed account opening form and passport size photos;
2.A
copy
of
PAN
card
as
proof
of
identity;
3.Personalised
cheque/Copy
of
the
bank
passbook
4.A copy of passport/voter ID/ ration card as a proof of address
5.Signing of the DP-investor agreement.
On giving the above papers, the agent would complete the other formalities with the
depository and facilitate opening of the account. You would then be given a unique
account number (BO ID- Beneficiary Owner Identity), which would serve as a reference
number for all further transactions.
A set of delivery instruction (DI) slips will be give to you from the DP. This is almost
similar to he cheque book you get when you open your bank account. A DI slip has to be
filled and sent to the DP on every delivery (sale of shares) you make. DI slip is an
instruction to the DP to debit your account and credit the brokers account with the
specific stock.
Take note that the DI instruction has to reach the DP the very next day after the sale,
failing which the securities wont reach the broker and hence the exchange. This could
result in auction of the security.
When you open a demat account with your stockbroker, you also sign and deliver a
standing instruction for delivery of stocks that you sell.Hence, the broker handles the
delivery system and you need not worry about all this.
2.TRADING ACCOUNT:-
Some of the beginners do not understand relationship between Share Trading account
and Demat Account. This short lesson will explain the relationship between Demat
account, trading Account and your Bank Account. We will also see how many trading or
Demat account you can have in total.
Trading account is an interface between your Bank account and your Demat
account. To buy shares, the first step is to transfer money from your bank account to
trading account. For example , if you want to buy 100 shares at Rs 50 , you have to
transfer Rs 5000 from your bank account to the trading account.
The shares that you buy will be stored in the demat account.
When you sell, your trading account takes back the shares from your Demat
account and Sells them in Stock Market and get back the money.
If you want your money back into your bank account, you have to give a request
online to the broker to transfer it to Bank account. The money gets credited in your bank
account in 2 or 3 working days.
Just as every person is allowed to open as many savings account as he likes,
there are no restrictions of the number of Demat Accounts a person can have. You can
have any number of demat accounts.
SELECTING A DEMAT AND TRADING ACCOUNT
The key criteria for selecting these accounts are:
1. Your purpose/usage. In short, how frequently are you going to buy/sell and is it
intraday or delivery based. You may have to choose the Broker whose charges are
lowest according to your transaction style.
2. Look at a complete solution and not just one individual product like a demat account.
After all, the money in the savings account will be linked to your trading account for
buying/selling shares and the trading account will be linked to your demat account for
storing the shares. Suppose you have a Savings account with Bank A, and the trading
account with Broker B and Broker B trading account does not have a partnering
arrangement with Bank A, you will be forced to open a new savings account with a bank
which has partnering arrangement with broker B. Usually, most non-bank brokerages
have tie-ups with the popular banks for savings bank accounts and demat accounts, but
brokerages in a banking group company may have only the same bank as its partner.
3. Think long term. In case you have got yourself a demat account and you have existing
shares in it and you want to move to another demat account, transfer of shares is
chargeable. Brokers may charge based on number of shares or amount worth or
anything. Please find out what this amount is, in case you are ever tired of bad service
and you want to change the demat account. These transfer rates are never mentioned
anywhere.
4. Technology. Some online stock brokers do a great job in making sure that their clients
can always access their accounts, and in turn buy and sell as quickly as possible. But on
the other side of things, not all brokers run this smoothly. Due to excess demands on the
system, some brokers have a slower load time than others. In fact, this can lead to the
server becoming bogged down. This is not common as it once was, but still this can
happen.
5. Service. With the demand increasing on discount stock brokers, it is common for
errors to occur from time to time. Hopefully this never happens to you, but you never
know what the future holds. If you notice a mistake on your account, it is important that
you contact the customer support team right away. This will help to ensure that you get
the issue worked out before it causes a snowball effect on your account. In most cases,
the broker you are working with will be apologetic for the mistake, and will do whatever it
takes to get the issue resolved within a matter of minutes. Also, Gauge the level of
personal service that a stockbroker provides as a final step in the selection process.
Every investor should be assigned a specific broker or representative to contact at any
time.
ACC Ltd.
Bharti Airtel Ltd.
DLF Ltd.
HDFC
Hero Honda Motors Ltd.
Hindustan Unilever Ltd.
Infosys Technologies Ltd.
Jaiprakash Associates Ltd.
Mahindra & Mahindra Ltd.
NTPC Ltd.
Reliance Communications Limited
Reliance Infrastructure Ltd.
Sterlite Industries (India) Ltd.
Tata Motors Ltd.
Tata Steel Ltd.
The BSE Sensex is not the only stock market index in India. The NSE has The NSE S&P
CNX Nifty 50 index a well diversified 50 stock index accounting for 24 sectors of the
economy. While both SENSEX and NIFTY would give you an overall direction of the
stock market there are other indices which track a particular sector.
For example The NSE CNX IT Sector Index tracks companies that have more than
50% of their turnover (or revenues) from IT related activities like software development,
hardware manufacture, vending, support and maintenance. So for those who are
tracking the performance of IT Sector this index would become a benchmark for
investing. Yet another example is the BSE BANKEX index which tracks the banking
sector shares.
WHATS GOOD ABOUT INDEXES
A stock market index is a statistical indicator which gives an idea about how the
stock market is performing. In India the main indexes to be tracked are The BSE
SENSEX and The NSE NIFTY.
The SENSEX comprises of 30 companies representing different sectors and the
broader NIFTY comprises of 50 companies from 24 sectors. There are many other
indexes that track particular sectors of the economy. These indexes would give you an
idea about how that particular sector is performing.
World over, there are a number of indexes as there are stock markets. DOW
JONES INDUSTRIAL AVERAGE and NASDAQ COMPOSITE INDEX both track US
stock markets. NIKKEI 225 is the stock market index of Japan, HANG SENG index for
Hong Kong, FTSE 100 For UK, KOSPI for Korea, SHANGHAI for China etc. All these
indexes serve the same purpose. It gives an idea about where the financial growth of a
country is headed to.
Corporate Identification
Number
U65990MH1994PLC07777
1
Company Name
SEVENHILL SECURITIES
LTD
Active director
Suresh Satyanarayan
Kabra,
Gireesh Satyanarayan
Kabbra,
And Dilip Kabra.
RoC
RoC-Mumbai
Registration Number
77771
Activity
Other financial
intermediation.
Company limited by
shares
Indian Non-Government
Company
Public Company
Company Category
Company Sub Category
Class of Company
15,000,000
14,249,000
Number of Members
(Applicable
only in case of company
without Share Capital)
Date of Incorporation
18 April 1994
Email ID
vinod.avs@gmail.com
Address 1
City
State
Maharashtra
Country
INDIA
PIN
400020
Unlisted
29 September 2012
31 March 2012
Active