The Hindu : Business : Trading in currency futures from Aug. 29

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Thursday, Aug 21, 2008
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Trading in currency futures from Aug. 29

Even retail investors stand to benefit

Mock trading sessions start
Exchange expects large volumes

MUMBAI: The National Stock Exchange (NSE) would conduct live trading in currency futures from August 29, the bourse said in release on Wednesday.

It will be for the first time even retail investors with no exposure to foreign exchange will be able to take a call on the rupee’s movement with the dollar.

All these years trading in foreign exchange was allowed only to banks and companies having currency exposure.

Top NSE officials said that about 80 per cent of its 1,000 odd members had shown interest in offering currency futures to their clients. Besides, a large number of banks and corporates had shown interest in exchange traded currency futures, an official said.

At present, trading in currency derivatives takes place among banks and corporates in the over-the-counter market only but registers large volumes estimated at $34 billion a day. Exchange traded currency derivatives are available and around 334 million contracts get traded annually the world over.

The NSE has still not figured out about the possible volume of business that will take place on the new platform. But the exchange is expecting large volumes, according to an official.

When asked whether the business done on the OTC market would shift to the exchange, an official said both would co-exist. The permission given by the Reserve Bank of India and the Securities and Exchange Board of India to allow trading in currency futures was part of the Government’s move towards capital account liberalisation, the NSE officials said.

All trades done at the NSE are cleared, settled and risk managed by the National Securities Clearing Corporation (NSCCL). The NSCCL is set up as a separate and independent entity. The practices and principles followed at NSCCL are globally benchmarked. The NSE has conducted around 15 road-shows attended by more than 2,000 participants across the country, according to the NSE release. Mock trading sessions for the currency derivatives segment has started from Wednesday. More than 300 members including banks participated actively in the mock session, the NSE release says.

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