Exchange-traded currency futures will now be expanded to the euro, pound sterling and yen pairing with the rupee, giving investors more flexibility to hedge their risks against volatility in exchange rates.
At present, currency futures are allowed only in the dollar-rupee contracts.
Both Securities and Exchange Board of India (SEBI) and the Reserve Bank of India on Tuesday came out with separate circulars to permit currency futures in three more pairs. As per SEBI guidelines, the contract size will be 1,000 for euro and pound sterling, and one lakh for the yen. Contracts will be quoted in rupee terms but the outstanding positions would be in foreign currencies.
The maximum maturity of the contract will be 12 months but all monthly maturities will have to be made available. The contract will be settled in cash and rupee and the settlement price would be the RBI's reference rate on the date of expiry.
The contract will expire on the last working day of the month, excluding Saturdays.
The gross open positions of a client in all contracts can go up to a maximum of six per cent of total such positions in the market by all players or five million euro or pound, or 200 million yen, whichever is higher.
A currency futures position at one maturity, which is hedged by an offsetting position at a different maturity, would be treated as a calendar spread, the SEBI said.
The calendar spread margin for dollar-rupee contracts has been set at Rs. 400 (per lot) for a spread of one month, Rs. 500 for a spread of two months, Rs. 800 for a spread of three months, and Rs. 1,000 for a spread of four months or more. - PTI
