Derivatives Market – History & Global Development

Did you know the first futures market was for Rice?

1. The Timeline

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2. Growth Drivers

1. Volatility: Post-1970s, exchange rates and interest rates became volatile. Businesses needed protection.
2. Technology: Computers allowed complex pricing (Black-Scholes Model) and instant trading.
3. Globalization: MNCs needed to hedge multiple currency risks.

3. Exam Notes: Writing the Answer

Question: "Trace the evolution of the Derivatives Market." (5 Marks)

Answering Strategy:

1. Origin: Mention Dojima Rice Exchange (Japan). It always impresses examiners.
2. Modern Era: Mention CBOT (Chicago) as the father of modern exchanges.
3. India: Mention L.C. Gupta Committee recommendation which led to NSE derivatives in 2000.

Summary

• From Agri to Financial: Started with Wheat/Rice. Now 99% volume is in Financials (Stocks/Currencies).
• Global: It is a 24-hour market.

Quiz Time! 🎯

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