The Hindu : Business : Panel for exchange traded currency futures

Online edition of India's National Newspaper
Friday, May 30, 2008
ePaper | Mobile/PDA Version

Business

Business

Panel for exchange traded currency futures

The minimum size of the dollar-rupee contract can be $1,000 initially

MUMBAI: With a view to enabling investors manage volatility in the currency market, a SEBI-RBI Committee on Thursday suggested introduction of currency futures markets, initially for dollar-rupee contract.

The eight-member committee recommends that initially FIIs and NRIs would not be permitted to participate in the currency futures market. The panel suggested that the minimum size of the currency futures contract at the introduction would be $1,000. The RBI has already issued comprehensive guidelines on foreign currency forwards in over-the-counter market.

The report of the SEBI-RBI Standing Technical Committee released on Thursday relates to the exchange traded currency futures. Exchange traded currency futures and OTC currency forwards are fundamentally different.

An individual entering into a forward contract in OTC agrees to transact at a forward price on a future date. On the maturity date, the obligation of the individual equals the forward price at which the contract was executed. Except on the maturity date, no money changes hands. On the other hand, in the case of an exchange traded futures contract, mark-to-market obligations are settled on a daily basis.

The currency futures contract would be quoted in rupee terms, the committee said. But, the outstanding positions would be in dollar terms, it added. The contract would be settled in rupee, it said, adding the futures contract would have all monthly maturities ranging from one to maximum 12 months. The settlement price would be the RBI reference rate on the date of expiry, it recommended. — PTI

Printer friendly page
Send this article to Friends by E-Mail

Business

News Update

Stories in this Section