DERIVATIVES

An Introduction
 Derivatives

• What is a derivative?: a financial product which

has been derived from another financial product or
commodity. Without the underlying product or
market, the derivative would have no independent
existence. Common types of derivatives are
Forwards, Swaps and Options.
• Derivatives have risen from the need to manage
the risk arising from movements in markets
beyond our control, which may severely impact
the revenues and costs of the firm.
 Swaps
• A swap, a popular financing tool, is a contract between two
parties (counter parties) to exchange two streams of payment
for an agreed period of time. Variants of swaps - interest rate,
currency, commodities, equity
• Financial swaps are a funding technique, which permit a
borrower to access one market and then exchange the
liability for another type of liability. The global financial
markets present borrowers and investors with a wide variety
of financing and investment vehicles in terms of currency
and type of coupon - fixed or floating.
• It must be noted that swaps by themselves are not a funding
instrument; they are a device to obtain the desired form of
financing indirectly. The borrower might otherwise have
found this too expensive or even inaccessible.
 Swaps
• A common explanation for the popularity of swaps
concerns the concept of comparative advantage. The basic
principle is that some companies have a comparative
advantage when borrowing in fixed rate markets while
other companies have a comparative advantage in floating
rate markets. This may lead to some companies borrowing
in fixed markets when the need is of a floating rate loan
and vice versa. Swaps are used to transform the fixed rate
loan into a floating rate loan. All swaps involve exchange
of a series of periodic payments between two parties.
• A swap transaction usually involves an intermediary who
is a large international financial institution. The two
payment streams are estimated to have identical present
values at the outset when discounted at the respective cost
of funds in the relevant markets.
 Interest Rate Swaps
• The two most widely prevalent types of swaps are interest
rate swaps and currency swaps.
• An interest rate or coupon swap involves an exchange of
different payment streams which are fixed and floating in
nature. In this, one party, B, agrees to pay to the other
party, A, cash flows equal to interest at a predetermined
fixed rate on a notional principal for a number of years. At
the same time, party A agrees to pay party B cash flows
equal to interest at a floating rate on the same notional
principal for the same period of time. The currencies of the
two sets of interest cash flows are the same. The life of the
swap can range from two years to over 15 years. This type
of a standard fixed to floating rate swap is also called a
plain vanilla swap in the market jargon.
• London Inter-bank Offer Rate (LIBOR) is often the
floating interest rate in many of the interest rate swaps.
 E.g. of Interest Rate Swap
Interest rate swaps are calculated based on the under-lying
notionals using applicable rates. Example of Coupon Swap:
Cost of Funds Fixed Rate Floating Rate
Good Credit 6% Libor
Poor Credit 8% Libor + 1%
Spread 2% 1%

Net Position Good Credit Poor Credit

Cost of Funds 6 L+1
Less Receipts on Swap (6.5) (L)
Plus Payments on Swap L 6.5
Overall Cost L-0.5 7.5
Note: The difference in spread of 1% is up for negotiation.
 Why enter into interest rate swaps?
• Lowering financing cost: use comparative
advantage
• Hedge exposure to interest rate risks: mismatched
income and outflow
• Restructuring the debt in the balance sheet
• Swaps are privately negotiated products.
However, parties with low credit rating have
difficulty in entering the swap market.
• Participants: MNCs, Banks, Sovereign and Public
Sector Institutions, etc.
• Facilitators: Dealers and Brokers
 Currency Swaps
• Currency swaps involve exchanging principal and fixed
rate interest payments on a loan in one currency for
principal and fixed rate interest payments on an
approximately equivalent loan in another currency.
• Suppose that a company A and company B are offered the
fixed five-year rates of interest in U.S. dollars and sterling.
Also suppose that sterling rates are generally higher than
the dollar rates. Also, company A enjoys a better
creditworthiness than company B as it is offered better
rates on both dollar and sterling. What is important to the
trader who structures the swap deal is that difference in the
rates offered to the companies on both currencies is not the
same. Therefore, though company A has a better deal in
both the currency markets, company B does enjoy a
comparatively lower disadvantage in one of the markets.
This creates an ideal situation for a currency swap.
 Currency Swaps
• The deal could be structured such that company B borrows
in the market in which it has a lower disadvantage and
company A in which it has a higher advantage. They swap
to achieve the desired currency to the benefit of all
concerned.
• It should be noted that the principal must be specified at
the outset for each of the currencies. The principal
amounts are usually exchanged at the beginning and at the
end of the life of the swap. They are chosen such that they
are equal at the exchange rate at the beginning of the life
of the swap.
• Like interest rate swaps, currency swaps are frequently
warehoused by financial institutions
 Currency Swaps

Currency swaps are used to exchange assets or

capital in one currency for another for the purpose
of financial management. Examples:
• Lowering funding cost: raise capital in the most
favourable market and then exchange the
currency of the raised capital for another by
swapping
• Entering restricted capital markets
• Reducing currency risk: exchanging foreign
currency payments into home currency payments
• Diversifying currency liabilities
 E.g. of Currency Swap
• HDFC raises floating rate dollar debt in the US
market, backed by the guarantee of USAID –
leading to borrowings being at very fine rates.
However, HDFC’s requirement is for long term
fixed rate rupees. Hence, HDFC swaps floating
rate dollar loans with Indian banks for fixed rate
rupees.
• Result: The counter parties (the Indian banks)
have access to floating rate dollars at a rate they
would not have been able to raise on their own,
while HDFC has access to fixed rate rupees at less
than market rates.
 Other Types of Swaps
• A swap in its most general form is a contract that involves
the exchange of cash flows according to a predetermined
formula. There is no limit to the number of innovations
that can be made given this basic structure of the product.
• One innovation is the combination of the interest and
currency swaps where the two parties exchange a fixed
rate currency A payment for a floating rate currency B
payment.
• Swaps are also extendable, where one party has the option
to extend the life of the swap or puttable, where one party
has the option to terminate the swap before its maturity.
• Options on swaps or Swaptions, are also gaining in
popularity.
 Swaps
• A Swap Dealer takes one side of the transaction
and acts as a counter party. A Broker only gets the
two counter parties together for the deal. The
parties to early swaps were end-user organisations
with merchant banks acting as arrangers. Today a
few banks run swap books or warehouse. Running
a swap book is a highly complex activity. Today a
range of commercial software has become
available.
• A swap is a contingent liability and does not have
to appear in balance sheet.
 Swaps
• Swap Documentation: Swap agreements are
usually initiated over telephone, and then
confirmed over telex, fax, letter within 24
hours. This is followed by documentation.
• Documentation standardised by New York
based International Swap and Derivatives
Association (ISDA).
• Standardisation of documentation has
facilitated the transaction process.
 Futures and Options
• Futures are a form of Forward Contract in which one
agrees to take delivery at an agreed price, quantity and
time in the future in a specific market. Future contracts
differ from Forward Contracts by the fact that they are
traded on a recognised public exchange.
• Options convey the right, but not the obligation to take
future delivery of an agreed quantity, at a certain price.
• The three major players in the derivatives markets are
hedgers, speculators and arbitrageurs.
• Arbitrage ensures that similar assets and similar risks are
priced uniformly throughout the world, thus promoting
stability. Futures and options markets have created a
mechanism for pricing and transferring risks around the
world.
 History & Development

• Japanese rice traders: hundreds of years

• Venetian spice traders: During the Renaissance
period
• American ranchers: 19th century
• Recent explosion of growth: the collapse of the
Bretton Woods fixed exchange rate regime during
the early 1970s
 Major Markets
• Chicago Mercantile Exchange: exchange-traded currency
futures in 1973
• Chicago Mercantile Exchange: interest rate futures in 1975
• Philadelphia Stock Exchange: currency options in 1983
• New York Futures Exchange: 1980
• London International Financial Futures Exchange (Liffe):
1982
• Singapore Monetary Exchange (SIMEX): 1983
• An important feature in the evolution of derivatives has
been the evolution of Over-the-Counter (OTC) market.
“Financial engineers” using off-the-shelf futures and
options products to satisfy special needs can develop
custom-made solutions. Such products with unique
risk/reward profiles are called hybrids.
 Forward Contracts
• A forward contract is a transaction in which buyer/
seller agree upon delivery of a specified quality
and quantity of asset at a future specified date. A
price may be agreed upon in advance or at the
time of delivery
• Forward contracts exist for a variety of underlying
assets:
• Metals (contracts for base metals on LME)
• Energy Products (crude oil and oil products)
• Interest Rates (Forward Rate Agreements - FRAs)
• Currency (forward forex transactions)
 Currency Forwards

• Banks and other traders - no single location

• Dealing by telephone/ telex
• Tailor made contract
• No secondary market
• Bank is the counter party
• Usually end with deliveries, while futures are
usually settled with differences
• No collateral or margin is usually required
 Futures Market

• Hedging in interest rates, currency rates and share

prices by taking a position that is equal and
opposite to an existing exposure
• A futures contract obligates the buyer to purchase
the underlying contract and the seller to sell it,
unless the contract is sold to another before
settlement date, which may happen in order to take
a profit or limit a loss. In practice, only a very
small percentage of futures contracts result in
delivery of the underlying commodity or security.
 Futures Market
• Open outcry by authorised brokers (commission)
on behalf of clients on trading floor (or pit)
• Period of contract: normally trade in a cycle of
four times annually – say four delivery dates in a
year. (e.g. 2nd Wednesday of March, June,
September and December on the LIFFE)
• Standard quantities in a few currencies
• Minimum price movement of the contract: tick
• Exchange traded instruments: hence credit
worthiness of the exchange is important, not
counter parties: settlement through clearing house
 Futures Market

• Credit worthiness of the exchange is maintained

by imposition of margins - `marked to market’ on
daily basis
• Margins are deposits which hedgers and
speculators offer as collateral for their futures
position. As the value of a position may change
daily, the margin is adjusted to ensure adequate
collateral. The initial margin is based upon the
value of the position and its inherent risk as
measured by its volatility.
 Comparison of forward and futures
markets in foreign exchange
Financial Futures Forward markets
Location Futures Exchange No single location
Trading medium Open Outcry Telephone/ telex
Contract size Standardised As reqd. by customer
Maturity/ Deliver Date Standardised As reqd. by customer
Counterparty Clearing House Known bank/ trader
Credit Risk Clearing House Individual counterparty
Commissions Always Payable Negotiable
Security Margin required Counterparty risk
Liquidity Provided by Provided by credit risk
Leverage margins
Very high No formal gearing
Settlement Via Clearing House Via bank arrangements
 Example of Currency Future
• A UK importer has to pay USD 160,000 to his seller on 15th April for
imports made in January. In February he is worried that the dollar may
appreciate against the pound and decides to cover the exchange risk in
the LIFFE futures market. The amount of the LIFFE sterling dollar
contract is STG 25,000 and the maturity 2nd Wednesday in June. The
current spot rate is $ 1.50 and June contract is being traded at $ 1.45.
• Decision: He decides to sell four June contracts at $ 1.45. On 15th of
April, the spot rate in the cash market is $1.40 and the June futures is
now trading at $ 1.36. This means that the $ 160,000 purchase in the
cash market will cost him 160,000/ 1.40 = STG114285.71. At the
original spot rate of $ 1.50, the UK importer would have paid 160,000/
1.50 = STG 106,666.66; thus there is a loss of STG 7619.05.
However, in the futures market, he can now buy back the four
contracts sold at $ 1.45 at $ 1.36, thus making a profit of 9 cents per
pound, or $ 9,000 or 9,000/ 1.40 = STG 6428.57 at current spot rate.
• Result: The hedge is not perfect, but the loss on account of adverse
movement in the spot market has been partially made up by resorting
to the futures market.
 Forward Rate Agreements (FRAs)
• FRAs allow borrowers to lock-in today an interest
rate (say LIBOR) accruing from a forward start
date for a given period, for eg. for month 6 in the
future to month 9.Very popular in 2-3 years range.
• The FRA is a contract between two parties to
agree on an interest rate on a notional loan or
deposit of a specified amount and maturity at a
specified future date and to make payments
between counter parties computed by reference to
changes in the interest rate.
• FRAs involve no exchange of principal amount.
 Example of an FRA

• The agreed 6 month LIBOR under an FRA is

3.5% per annum on a given future date. If the
actual LIBOR rate happens to be 4%, the bank
will reimburse to the buyer of the FRA the
difference of 0.5% p.a.
• On the other hand, if the actual LIBOR rate
happens to be 3% p.a., the borrower will have to
pay the difference to the bank.
• It is not necessary that the bank be a lender in the
transaction.
 Options
• The buyer of the option has the right but not the obligation
to buy or sell a specific quantity of a particular asset, at a
specified price at or before a specific date in the future. On
account of price movements, the option may increase,
decrease or remain unchanged in value.
• Maximum risk of the buyer of the option is the actual up-
front premium cost of the option.
• Users are able to obtain insurance against an adverse
movement in the exchange rate while still retaining the
opportunity to benefit from favourable exchange
movements
• Currency option contracts available on an exchange are
standardised
 Options
• Prices, or premia, for foreign exchange options are arrived
at through competition between sellers and buyers on the
floor of the exchange
• Currency options are of particular interest to the treasurer
where a future currency cash flow is uncertain, say when
putting in a contract tender. If the contract is not awarded
the company allows the currency option to lapse, or sells at
a profit.
• Popular in times of large volatility in markets
• OTC market takes care of tailor-made options between
banks and customers. Often banks use exchange traded
options to hedge OTC positions
 Option Terminology
• Call Option : The right to buy at a fixed price, on or before a
fixed date, a fixed quantity
• Put Option: The right to sell at a fixed price, on or before a
fixed date, a fixed quantity
• Strike or Exercise Price: Fixed price at which the option may
be exercised and the underlying asset bought or sold
• Premium: The price or cost of an option
• In-the-Money: The option has an exercisable value, i.e. in the
case of a Call Option the exercise price is below the spot
price; and in the case of a Put Option, the exercise price is
above the prevailing spot price.
• At-the-Money: The Option exercise price equals the
prevailing price of the underlying asset
• Out-of-the-Money: The Option price lies above the prevailing
price of the underlying asset in the case of a Call or below in
the case of a Put
 Option Terminology
• Maturity or Expiration Date: Final day on which an option
may be exercised
• American Option: The option may be exercised by the
buyer at any time before maturity
• European Option: The option can only be exercised by the
buyer on the maturity date, and not before that date.
• Intrinsic Value: The positive difference between exercise
price and market price. An option has intrinsic value if it is
in-the-money. For a call option the strike price has to be
under the price of the underlying; for a put option the
strike price has to be over the price of the underlying.
 Call Option Perspectives
Option Buyer’s Perspective Option Seller’s Perspective
Pay-offs per $

0.50
46.50 Profit Area
47.00
0 0
47.00 46.50
0.50 Loss Area

Exercise Price = Rs. 46.50 per $ Option Premium = Rs.

0.50 per $
 Put Option Perspectives
Option Buyer’s Perspective Option Seller’s Perspective
Pay-offs per $ Pay-offs per $

Profit
Area 46.50 46.00
0 0
46.00 Loss
46.50
Area

Exercise Price = Rs. 46.50 per $ Option Premium = Rs. 0.50

per $
 Example of Currency Option
• A US manufacturer imports his raw materials from UK. In
six months time (i.e. say June 2005) he will need to import
goods worth STG 1 million and has to pay for the imports.
He wants to protect himself from exchange fluctuations,
yet wants to take advantage of favourable ER movement.
• Jan.2005: Market conditions: STG/ USD = 1.50
• June Calls @ Strike Price of STG/ USD = $ 1.51, premium
4 US cents
• Result: In June 2005, the USD does weaken and the new
spot rate is STG/ USD = 1.60. Hence the Call Option now
has an intrinsic value of 9 US cents: the exercise of the
Call Option Contract will net $ 90,000 ($ 1.6 million
minus $ 1.51 million.)
• The premium price was $ 40,000 (1million x 4/100). Net
gain by US importer = $ 90,000 - $ 40,000 = $ 50,000.
 Option Pricing
• Mathematical model developed by Fischer Black
and Myron Scholes (1973). Adapted by Garman
and Kohlhagen (1983) for currency options
• The Black-Scholes model determines a fair value
price based on current price (spot) , exercise price,
time remaining before expiration of the option, the
compounded risk less rate of interest and the value
of the cumulative normal density function
• The fair value price as well as supply and demand
then determines market price of the option.
• Nowadays various menu driven packages are
available for arriving at the values of call and put
options after feeding the primary data.
 Option Pricing by Black and Scholes
• Pc = [Ps][N(d1)] – [Pe][antiln(-Rft)][N(d2)], where
• Pc = market price of the call option
• Ps = price of the stock
• Pe = striking price of the option
• antiln = antilog (base e)
• Rf = annualised interest rate
• t = time to expiration (in years)
• N(d1) and N(d2) are the values of the cumulative normal
distribution defined by
• d1 = [In(Ps/Pe) + (Rf + 0.5 σ2)t] / σ√ t, d2 = d1 – (σ√ t)
• Where In(Ps/Pe) = the natural logarithm of (Ps/Pe)
• σ2 is the variance of continuously compounded rate of return
on the stock per time period
 Option Pricing
• In 1983 Garman and Kohlhagen extended the Black-
Scholes model to cope with the presence of two interest
rates (one for each currency). Suppose that rd is the risk-
free interest rate to expiry of the domestic currency and rf
is the foreign currency risk-free interest rate (where
domestic currency is the currency in which we obtain the
value of the option; the formula also requires that FX rates
- both strike and current spot be quoted in terms of "units
of foreign currency per unit of domestic currency"). Then
the value of a call option into the foreign currency has
value
• exp( − rfT)SN(d1) − Kexp( − rdT)N(d2), where
• S is the current spot rate, K is the strike rate
• N is the cumulative normal distribution function
• and σ is the volatility of the FX rate.
Values of d1 and d2
 Interest Rate Options
• They enable a co. to take advantage of favourable
movements of interest rates by providing the right
but not the obligation to fix a rate of interest, on a
notional loan or deposit, for an agreed amount, for
a fixed term, on a specified forward date. The
seller of the option guarantees an interest rate if
the option is exercised. The seller receives a fee,
the premium, for providing this guarantee.
• The most common type of interest rate option is
available to borrowers as a hedge against rising
interest rates. This is known as the interest rate
cap.
 Caps
• Major international banks offer, for a fee, a kind of
insurance cover for fluctuations in interest rates
like the LIBOR. In such cases, the bank agrees to
reimburse to the borrower the cost of LIBOR
exceeding a particular level during the currency of
the loan. This is known as a `cap’.
• The fee to be paid by the borrower would depend
upon the difference between the cap and the
current rate, the period for which the contract is to
run, the anticipated interest rate volatility, etc. The
higher the cap, the lower the fee; the longer the
period, the higher the fee, etc.
 Collars
• Interest rate floors protect investors against falling
interest rates. When a contract specifies both the
cap and floor, it is known as a `collar’ or `band’.
• Dealing with an interest rate collar is cheaper than
buying the straight interest rate cap or floor since
the buyer is giving up some of his upside benefit if
rates move in his favour. Effectively, the
simultaneous purchase and sale of a cap and a
floor is known as a `collar’. For example, if the
actual LIBOR is lower than the band, the buyer of
the collar will pay the difference to the insurer.
• It is possible to structure zero cost options for both
currencies and interest rates.
 Derivatives in India
• Foreign Exchange Management (Foreign
Exchange Derivative Contracts) Regulations, 2000
• Residents in India and residents outside India are
allowed to enter into a Foreign Exchange
Derivative Contract as well as a Commodity
Hedge to hedge an exposure to risk in respect of
FEMA permissible transaction
• In respect of permissible transactions, an AD in
India may remit outside India foreign exchange
towards option premium payable as well as
amounts incidental to the derivative contracts
(including necessary margins).
Foreign Exchange Derivative Contracts:
Forward Contract
A person resident in India may enter into a forward
contract with an AD in India subject to:
• The AD through documentary evidence is satisfied
about the genuineness of the underlying exposure
• The maturity of the hedge does not exceed the
maturity of the underlying exposure
• The currency of hedge and tenor are left to the
choice of the customer
• Where the exact amount of the underlying
transaction is not ascertainable, the contract is
booked on the basis of a reasonable estimate
Foreign Exchange Derivative Contracts:
Forward Contract contd.
• Substitution of contracts for hedging trade transactions
may be permitted by an AD on being satisfied with the
circumstances under which such substitution has become
necessary.
• ADs are permitted to offer forward contracts to their
importer/exporter constituents on the basis of last 3 years
average import/export performance, or the previous year’s
actual import/export turnover, whichever is higher, without
production of the underlying contracts.
• Cancellation and rebooking of all eligible forward
contracts booked by residents, irrespective of tenor,
allowed subject to certain conditions.
Foreign Exchange Derivative Contracts:
Contracts other than Forward Contracts
• A person resident in India who has borrowed
foreign exchange may enter into an Interest Rate
Swap/ Currency Swap/ Coupon Swap/ Foreign
Currency Option/ Interest Rate Cap or Collar
(Purchases) or Forward Rate Agreement (FRA)
contract with an AD in India or with a branch
outside India of an AD for hedging his loan
exposure and unwinding from such hedges.
• A person resident in India, who owes a foreign
exchange or rupee liability, may enter into a
contract for foreign currency- rupee swap with an
AD in India to hedge long-term exposure.
Foreign Exchange Derivative Contracts:
Contracts other than Forward Contracts
• All Indian clients are allowed to purchase cross
currency options to hedge exposures arising out of
trade. They are allowed to use cost reduction
strategies and structures as long as they are not net
receivers of premium. Authorised Dealers (ADs)
in India who offer these products are required to
cover these products back to back in international
markets and not carry the risk in their own books.
• Indian banks are allowed to use the above
products to hedge interest rate and currency
mismatches on their balance sheets.
Foreign Exchange Derivative Contracts:
Permissible for Residents outside India
A Registered FII may enter into a forward contract
with rupee as one of the currencies, to hedge an
exposure in India, provided:
• The value of the hedge does not exceed the current
market value of its investments;
• Forward contracts once cancelled shall not be re-
booked but may be rolled over on or before
maturity;
• The cost of hedge is met out of repatriable funds
and/ or inward remittance through normal banking
channels.
Foreign Exchange Derivative Contracts:
Permissible for Residents outside India
• A non-resident Indian (NRI) or Overseas
Corporate Body (OCB) may enter into a forward
contract with the rupee as one of the currencies,
with an AD in India, to hedge:
• The amount of dividend due to him on shares held
in an Indian company;
• The balances held in FCNR/ NRE accounts;
• The amount of investment made under portfolio
scheme
 Foreign Currency Rupee Options
• Introduction of Foreign Currency- Rupee Options
in India wef July 7, 2003. Initially only OTC
contracts introduced – plain vanilla products, i.e.
European exercise call and put options.
• Only customers with genuine foreign currency
exposures are eligible to enter into contracts. At
present options cannot be used to hedge
contingent or derived exposures except exposures
arising out of tender bids in foreign exchange.
• Customers can also enter into packaged products
involving cost reduction structures and does not
involve customers receiving premium.
Foreign Currency Rupee Options contd.
• Writing of options by customers is not permitted.
• ADs may quote the option premium in Rupees or
as a % of the rupee/ foreign currency notional.
• Option contracts may be settled on maturity either
by delivery on spot basis or by net cash settlement
in Rupees on spot basis.
• The limit available for booking of forward
contracts on past performance would be inclusive
of option transactions.
• Only one hedge transaction can be booked against
a particular exposure/ part thereof for a given time
period.
 Foreign Currency Rupee Options contd.

ADs having adequate internal control, risk

monitoring / management systems, mark to market
mechanism and fulfilling the following criteria
will be allowed to run an option book after
obtaining approval from RBI:
• Continuous profitability for three years;
• Minimum CRAR of 9%
• Net NPAs at reasonable levels (not more than 5%
of net advances)
• Minimum net worth not less than Rs. 200 crores
Foreign Currency Rupee Options contd.

• The product may be offered by other ADs having

a minimum CRAR of 9% on a back-to-back basis.
• Banks can use the product for hedging trading and
balance sheet exposures. They have to put in place
necessary systems for marking to market the
portfolio on a daily basis.
• Market participants may follow only ISDA
documentation.
 Commodity Hedge
• Banks have been allowed to approve proposals for
commodity hedging in international exchanges from their
corporate customers.
• Basically, Indian entities who have genuine exposures to
commodity price risk can undertake hedging activities. All
standard exchange traded futures will be permitted.
• As regards options, only purchases will be allowed.
However, it is open to the corporates to use combinations
of option strategies involving a simultaneous purchase and
sale of options as long as there is no net inflow of
premium, direct or implied. Corporates are also allowed to
cancel an option position with an opposite transaction with
the same broker.
 Commodity Hedge contd.
• The corporates should not undertake any
arbitraging/speculative transactions. The
responsibility of monitoring transactions in this
regard will be that of the AD.
• RBI, through this process, has allowed Indian
corporates need based access to a wide range of
derivative products available in established
international exchanges like LME, Simex, LIFFE,
CBOT and the OTC market. Large Indian players
in commodities are fairly active in these markets.