Mumbai, Nov. 14: The Securities and Exchange Board of India (Sebi) today cleared plans for the launch of seven derivative instruments on the bourses.

The new products include a volatility index and futures and options contracts, options on futures and options (F&) with a longer life.

The decision to allow trading in these instruments was taken by the Sebi board which met today in Chennai. The Rammohan committee had suggested the introduction of these instruments to give market participants better ways to hedge their risks. The products will be introduced under a suitable framework in due consultation with the regulators.

“These are just in-principle initiatives and we haven’t set timelines for their introduction. We might need more regulatory directives before the products are placed in the F& baskets,” a senior Sebi official told The Telegraph.

The other products cleared today by Sebi are mini-contracts on equity indices, bond indices and F& contracts, exchange-traded currency (foreign exchange) F&Os, and exchange-traded products to cater to different investment strategies. The volumes in the futures and options segment of the market have swelled to between Rs 60,000 crore and Rs 70,000 crore every day. Before the market regulator clamped curbs on participatory notes, traded volumes on the F& market had touched a high of over Rs 100,000 crore in October. Sebi believes these new derivative products will provide investors with a larger range of risk mitigation options and create more activity in the Indian onshore markets.

“This is a positive move. First, this will increase the volume of futures at the exchanges. Second, this will bring offshore derivatives to India, and third, this will improve the price discovery mechanism for stocks,” said Amitabh Chakraborty, president (equity) at Religare Enterprises.

The move to increase the life of options will increase investor interest. At present, options are valid for only one month. The recommendation to trade currencies on F& between exchanges is also a major initiative. At present, they are settled between banks. The regulator also said the specifications of these products and trading modalities would be decided through a wider consultative process. However, the introduction of such products will depend on the design, risk mitigation features and conformity to regulatory requirements.