Structuring the Nebulous Derivative Souk in India - A Bid to Ascertain National Multi Derivative Exchange

The financial system consists of specialized and non specialized financial institutions, of organized and unorganized financial markets, of financial instruments and services, which facilitate transfer of funds. Derivatives' being recognized as the best and most cost-efficient way of meeting the felt need for risk hedging in certain types of commercial and financial operations is the central premise of the paper. Defining derivatives in its first part, paper traces crest and trough of derivative trading by analyzing its growing importance in a countries economy. With a threshold that domestic derivative markets have not developed as much as the markets in developed countries or even the securities market in our own country this paper drives implication of derivatives on the volatility of the spot markets. Paper explains the current regulatory framework and concentrates on need and scope for new set of regulations for establishment and operation of National Multi Derivative Exchange. Advocating for establishment of NMDE paper depicts and suggests possible avenues for interlinking of existing regulators of derivative market as a subsidiary to the proposed NMDE. Paper further analyzes the minimum requirement for regulatory structure of NMDE and draws conclusion