The Bombay Stock Exchange on Monday announced that it would be shifting from cash settlement to physical settlement on single stock derivative contracts.All single stock futures and options contractsexpiring on February 10, and March 17, 2011 will continue tobe cash-settled. There will be no change in other contractspecifications like contract size, strike intervals, number ofstrikes for options, expiry day, and calculation of settlementprice. Final settlement will be on expiry + 3 business days.

BSE said that in single stock futures contracts, allopen positions at expiry will result in delivery obligations. In single stock options contracts, exercise of allopen positions will be solely at the discretion of the buyeron the expiry day. In other words, there will be no automaticexercise of these contracts on expiry day. The exerciseprocedure will be triggered on receipt of exercise notice fromthe trading member (TM) of the client during the time windowprovided on the expiry day, BSE said.

In a move that will be closely watched by other bourses, the Bombay Stock Exchange (BSE) has decided to introduce delivery-based stock futures and options contracts (F&O) from February. The move comes six months after the capital market regulator gave the go-ahead for delivery-based stock derivatives.

“Effective February 1, trading on all existing single stock F&O contracts expiring on or after April 13, 2011, will be delivery-based,” said a BSE circular released on Monday. “All single stock F&O contracts expiring on February 10 and March 17 will continue to be cash-settled. There will be no change in other contract specifications like size, strike intervals, number of strikes for options, expiry day, and calculation of settlement price. Final settlement will be on expiry + three business days,” added the circular.

The National Stock Exchange, which has a monopoly in the equity derivatives segment, has continued with the cash settlement mechanism in the derivatives arena. It has, however, switched to the European style of contracts, wherein the contract can be squared off only on the day of expiry (maturity).

The Bombay Stock Exchange on Monday announced that it would be shifting from cash settlement to physical settlement on single stock derivative contracts.All single stock futures and options contractsexpiring on February 10, and March 17, 2011 will continue tobe cash-settled. There will be no change in other contractspecifications like contract size, strike intervals, number ofstrikes for options, expiry day, and calculation of settlementprice. Final settlement will be on expiry + 3 business days.

BSE said that in single stock futures contracts, allopen positions at expiry will result in delivery obligations.

source- business standard & others