| Welcome to Currency Derivatives Trading |
Indian investor can now add one more 'investment option' in their portfolio – current derivatives. Regulatory approval from RBI and SEBI was recently made available (Aug 2008) and this allows exchanges in India to launch currency derivatives for trading, similar to equity / commodities derivatives trading.
With launch of currency derivatives in India through stock exchanges, there would be dynamic shift in currency trading and hedging. Indian entity would be able to take positions on the external value of the rupee without having an underlying foreign currency exposure. It would enhance overall efficiency of the currency market via transparency in pricing, increase investor based and categories, enhancing opportunities to invest and eliminate counter-party risk.
An FAQ has been prepared so as to explain and make you understand about this market.
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A) As per current regulation, following entity can participate in this market
1.Indian Resident,
2.Corporates registered in Indian (particularly those to an involve in foreign currency due to their business nature),
3.Domestic / Indian Financial Institutions and Banks
As of now, the regulation does not allows Foreign Institutional Investors (FII) and Non-Resident Indian (NRI) to participate in this market. |
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A) Contact will have following basic specification
1.Size - US Dollar 1,000.
2.Minimum price fluctuation / tick size – Rupee 0.0025 or Paise 0.25
3.Period / term of contract – for 12 near calendar months
4.Expire date & time – last business day of the month
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| A) Market time would be from IST 9 am to IST 5 pm. |
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| A) Order will be market driven such like in equity market (prioritized on time & rate basis). |
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A) Based on his trades and open position, financial ledger of client account for mark-to-market (MTM) loss / profit along with margin requirements (similar to equity derivatives). Client would have to make up for such requirements upfront or by the day end (of each billing cycle) as per specification of the member-broker. The daily clearing and settlement process would take into account – daily trades, position computation, daily settlement price for outstanding position contract(s) and MTM.
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| A) Open contract will be settled on the relevant expiry date (as per contract specification) in cash (in Indian rupee) at the relevant RBI reference rate. The final / expiry day clearing and settlement process would take into account final day settlement price for outstanding position contract(s). |
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| A) The eligible participant will have to register with member-broker who is registered on Indian Stock Exchange and allowed to register clients for trading in currency derivatives. Registration process of the member-broker would need to be followed by the participant and adhere to relevant trading terms of the member-broker and the stock exchange. |
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