While browsing on Twitter, we came across a thread on the Financial Securities Exchange (Private) Limited’s (FINSEC) official account, that said it was working on automated contract writing and derivatives trading.
The thread by FINSEC reads as follows:
FINSEC will be introducing automated contract writing and derivatives trading, complete with direct integration of the trading, clearing, custody, and settlement facilities. This will ensure maximum transparency in the entire process from contract writing to settlement.
Part 1
A derivative is an agreement between traders for selling or buying of shares, commodities, currency in future at a price agreed today hence little or no investment is needed to enter into such a contract.
Part 2
The contract gives the right to buy or sell the securities on previously agreed price irrespective of the price of the same in the spot market. The value of this contractual agreement changes with the price movement of the mentioned security in the spot market.
Part 3
Derivatives are used to reduce the exposure of risk (hedging) and assist in countering financial risks associated with fluctuation of price, interest rate and currency exchange rate. They also protect sellers from loss due to price fluctuation (price downfall).
Part 4
Derivatives also provide a platform to speculate and make a profit for those who are ready to take risks. Above all financial derivatives transfer risks from those who want to avoid it to those who are ready to accept it.
Part 5
