How big is derivatives market in India?
The Indian stock market's derivatives segment scaled record highs on friday, with the National Stock Exchange's (BSE) Nifty futures and options (F&O) contracts reaching a total turnover of ₹8.28 lakh crore. This is a growth of 37% from the previous week's total turnover of ₹6.18 lakh crore.
The gross market value of outstanding derivatives – summing positive and negative values – surged from $12.4 trillion at end-2021 to $18.3 trillion at end-June 2022, a 47% increase within six months (Graph 1. A).
The National Stock Exchange of India (NSE) has again emerged as the world's largest derivatives exchange in 2023, in terms of the number of contracts traded, according to the Futures Industry Association (FIA).
The gross market value of OTC derivatives grew by 8.1% to $19.8 trillion as of end-June 2023 compared to the middle of 20222. This was driven by higher interest rate derivatives market values due to increases in interest rates for key currencies.
Derivative contracts are short-term financial instruments that come with a fixed expiry date. The underlying asset can be stocks, commodities, currencies, indices, exchange rates, or even interest rates. Derivative trading involves both buying and selling of these financial contracts in the market.
Worldwide volume of exchange-traded derivatives reached 15.17 billion contracts in December, the highest level ever recorded. This was up 8.4% from November 2023 and up 79.7% from December 2022.
The derivatives market is, in a word, gigantic—often estimated at over $1 quadrillion on the high end. How can that be? Largely because there are numerous derivatives in existence, available on virtually every possible type of investment asset, including equities, commodities, bonds, and currency.
NSE has emerged as the largest derivative exchange in 2023. Continuing its dominance among peers for five years, the National Stock Exchange of India emerged as the world's largest derivative exchange in 2023 by the number of contracts traded.
The Indian stock market's derivatives segment scaled record highs on friday, with the National Stock Exchange's (BSE) Nifty futures and options (F&O) contracts reaching a total turnover of ₹8.28 lakh crore. This is a growth of 37% from the previous week's total turnover of ₹6.18 lakh crore.
Buffett devoted one-fifth of his 21-page annual letter to Berkshire shareholders to explaining how he uses derivatives to make long-term bets on stock markets, corporate credit and other factors.
What is future in derivatives market?
Futures are a type of derivative contract agreement to buy or sell a specific commodity asset or security at a set future date for a set price.
International Swaps and Derivatives Association
The upswing was driven by growth in interest rate and foreign exchange (FX) derivatives amid rising interest rates for major currencies. Global OTC derivatives notional outstanding increased by 13.1% at mid-year 2023 compared to the middle of 2022.
The Global Derivatives market is anticipated to rise at a considerable rate during the forecast period, between 2023 and 2030. In 2022, the market is growing at a steady rate and with the rising adoption of strategies by key players, the market is expected to rise over the projected horizon.
In India, the derivative market is regulated by the Securities and Exchange Board of India. India has two types of derivative markets: The exchanges-traded market and the over-the-counter (OTC) market. The exchanges-traded market is where standardized contracts are traded on an exchange.
There are four different types of derivatives that can easily be traded in the Indian Stock Market. Each derivative is different from the other and consist of varying contract conditions, risk factor and more. The four different types of derivatives are as follows: Forward Contracts.
What Are The Different Types Of Derivative Contracts. The four major types of derivative contracts are options, forwards, futures and swaps.
| Product | Volume(Contracts) | Value(₹ Lakhs) |
|---|---|---|
| Stock Futures | 12,49,287 | 1,11,80,912.57 |
| Index Options | 72,50,83,331 | 63,42,885.22 |
| Stock Options | 48,58,196 | 9,92,606.38 |
| Index Futures | 3,37,637 | 29,27,861.57 |
What is volume in the stock market? Volume is an indicator that means the total number of shares that have been bought or sold in a specific period of time or during the trading day. It will also involve the buying and selling of every share during the specific time period.
Volume and open interest are key technical metrics describing the liquidity and activity of options and futures contracts. "Volume" refers to the number of contracts traded in a given period, and "open interest" denotes the number of contracts that are active or not settled.
Number of futures and options contracts traded globally 2013-2022. In 2022, 29.32 billion futures contracts were traded worldwide, up from 12.13 billion in 2013. The number of options contracts traded increased from 9.42 to 54.53 billion contracts in the same period.
What is the biggest underlying issue with derivatives?
Loss of flexibility.
The standardized contracts of exchange-traded derivatives cannot be tailored and therefore make the market less flexible.
The Dangers of Derivatives
A number of well-known hedge funds have also imploded as their derivatives positions declined dramatically in value, forcing them to sell their securities at markedly lower prices to meet margin calls and customer redemptions.
The National Stock Exchange of India cemented its place as the largest derivatives exchange in the world in 2022. Mumbai-based NSE traded over 38 billion contracts in 2022, followed by the Brazilian B3 with 8.3 billion.
It is the world's largest derivatives exchange by number of contracts traded and the third largest in cash equities by number of trades for the calendar year 2022. It is the 7th largest stock exchange in the world by total market capitalization, as of January 2024.
Most of the trading in the Indian stock market takes place in the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). As of 2024, India ranked as the fourth largest market in the world. The two dominant Indian market indexes are Sensex and Nifty.
