Derivatives Market
The FINSEC Derivatives Market facilitates the writing, listing, trading and settlement of standardised futures and option contracts. The market is anchored on comprehensive rules and guidelines that guide the conduct of market participants and investors to ensure a safe and credible market place. FINSEC has fully automated the market using Derivatives Market Technology (DMT) to ensure efficiency, security and convenience.
Option Contracts
Option Contracts give the buyer the right, but not the obligation, to buy or sell an underlying asset on a certain date (expiration date) at a specified price (strike price). There are two types of options: calls and puts. FINSEC offers European-style options meaning they can only be exercised on the expiration date.
Futures Contracts
A Futures Contract is a standardized legal contract to buy or sell an asset at a predetermined price for delivery at a specified time in the future, between parties not yet known to each other. FINSEC provides clearing house facilities to management risk through margin management.
Contract Specifications
Key Participants
Stock Brokers
The role of a stock broker is to facilitate the buying and selling of derivatives at the FINSEC derivatives markets, on behalf of investors.
Clearing Participants
Clearing Participants clear and authorize all buy and sell orders and collect the appropriate collateral and margins (as appropriate) from the Investors and deposit it with the Custodian Bank.
Custodian Banks
Custodians can also register as Clearing Participants and they are responsible for the safekeeping of the underlying securities, that is, cash or equities deposited as collateral. They hold the collateral for trades placed for Option Contracts that are executed through the Clearing Participants.
Fund Managers
Implement investment strategies on behalf of their institutional and high net worth clients. Fund Managers are key liquidity providers on the Derivatives Market and may also play the role of Market Makers.
Institutional & Individual Investors
They are the key players on the Derivatives Market. They use the market for hedging, arbitrage and speculation purposes to enhance their trading strategies.
Clearing House
The Clearing House undertakes the clearing, risk management and settlement functions. It is the Central Counterparty in all of the transactions of Exchange Tradable Derivatives- Futures and Options.
