In a move the check the rupee volatility, the Reserve Bank of India (RBI) banned banks from proprietary trading in domestic currency futures and options, and the Securities and Exchange Board of India (SEBI) increased the margin requirement on domestic dollar-rupee forward trade.
“It has been decided that banks should not carry out any proprietary trading in the currency futures / exchange-traded currency options markets. In other words, any transaction by banks in these markets will have to be necessarily on behalf of their clients,” the RBI said. The apex bank also said that these instructions would come in to effect immediately and “shall be in force till further orders.”
SEBI, in the meanwhile, said that “in consultation with RBI and in view of the recent turbulent phase of extreme volatility in dollar-rupee exchange rate, it has been decided to curtail position limits and increase margin requirements for currency derivatives.”
SEBI increased initial and extreme loss margins by 100 per cent of the present rates for dollar-rupee contracts in currency derivatives. Further, it said that the gross open position of a client across all contracts shall not exceed 6 per cent of the total open interest or $10 million, whichever is lower.
In the case of a trading member who is not a bank, its gross open position across all contracts shall not exceed 15 per cent of the total open interest or $50 million, whichever is lower. However, SEBI asked exchanges to implement these provisions from July 11.
