Derivatives, ideal option for speculators - Analyst

Some investors who would purchase a stock with the sole purpose of making a profit may not know the difference between speculation and investing. Speculators who don't care much about the inherent value of the stock could create a lot of volatility in the market. Over speculation could affect even the best performing market in the world.

Arup Mukherjee, the Assistant Vice President of the National Stock Exchange of India Ltd. said in Colombo yesterday that creating a different play ground for speculators in the form of a derivatives market could be the ideal solution to this problem.

Addressing a seminar organised by the Colombo Stock Exchange on derivatives Mukherjee said that there is lot of potential for derivative instruments in Sri Lanka.

"Trade volumes of derivative markets worldwide are growing at a rapid rate. Derivative instruments such as futures, options and swaps are increasingly popular among tech-savvy youth in India. It could be the ideal market for the young people in Sri Lanka," Mukherjee said.

He said creating awareness among people about derivative instruments such as futures and option is very important.

"Increasing the number of participant will help the liquidity levels of the market. A key feature of derivatives market is the superior liquidity level," Mukherjee said. (CK)