InvestorQ : Are derivatives held in demat account?
Priyanka Jain made post

Are derivatives held in demat account?

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Arti Chavan answered.
3 years ago
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This is an area where a lot of people have got confused in the past and you are getting the same doubts perhaps. Let us understand what is a demat account all about? It is about ownership. You own shares, it is in demat account. You own bonds, it can be held in demat account. You hold RBI bonds or gold bonds they can be held in demat account. You have ETFs or mutual funds, that also can be held in demat account. So, basically you only keep assets you can own in your demat account. Is derivatives an asset? No they are contracts. If you buy futures or options you settle the trade in cash only. There is no involvement of demat account since there is no ownership. Of course, with stock futures resulting in compulsory delivery from July for a set of 46 stocks, this demat account should become relevant to derivatives also.
However, it can be said that Demat has facilitated development of derivatives market. This is something a lot of investors do not really appreciate. The derivatives market actually took off with cash-futures arbitrage. This would not have been possible if there was uncertainty of delivery, as was the case with physical delivery. Under demat; the entire system is so certain and perfect that one can effectively hedge their cash positions using futures and options. Since investors typically use futures and options to hedge their risk, they are to a large extent dependent on the growth of demat; indirectly if not directly.
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