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RBI, SEBI finalise norms for currency futures

MUMBAI: The Securities and Exchange and Board of India (SEBI) and the Reserve Bank of India on Wednesday came out with a broad frame work and guidelines to enable trading in currency derivatives on stock exchanges.

“Any bank, included in the Second Schedule to the Reserve Bank of India Act, 1934, and specifically authorised by the RBI for this purpose is eligible to become a clearing member and/or a trading member of the currency derivatives segment of an exchange, on the recommendation of the governing body of the exchange,” SEBI stated.The gross open position of a trading member, across all contracts, shall not exceed 15 per cent of the total open interest or $25 million, whichever is higher. However, the gross open position of a trading member, which is a bank, across all contracts, shall not exceed 15 per cent of the total open interest or $100 million, whichever is higher. The last day for trading of the contract shall be two working days prior to the final settlement day, with the settlement price on the last trading day being the Reserve Bank’s reference rate on that date.

Currency Futures means a standardised foreign exchange derivative contract traded on a recognized stock exchange to buy or sell one currency against another on a specified future date, at a price specified on the date of contract, but does not include a forward contract.

Currency futures are permitted now only in U.S. dollar-Indian Rupee. Standardised currency futures shall have the features that: Only U.S. dollar-Indian rupee contracts are allowed to be traded; the size of each contract shall be $1,000; the contracts shall be quoted and settled in Indian rupees; the maturity of the contracts shall not exceed 12 months; the settlement price shall be the Reserve Bank’s reference rate on the last trading day.

PTI reports:

Earlier in May, a committee comprising eight members drawn from the RBI and SEBI had proposed the introduction of currency futures market and suggested that NRIs and FIIs should not be permitted to participate in such markets.

SEBI chief C. B. Bhave said on Tuesday that three entities had evinced interest in launching exchange traded currency futures

Sources had said that the three firms are NSE, MCX promoter Financial Technologies and a consortium of HDFC, Kotak and SBI.

On the specific time-frame for the launch of currency futures, Mr. Bhave had said this was not in SEBI’s hands as the three entities were in various stages of preparing software and setting up hardware for the purpose.

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