Mumbai: The path has been cleared for currency futures trading with both the Reserve Bank of India, or RBI, and the Securities and Exchange Board of India, or Sebi, the capital market regulator, releasing guidelines for such trading on Wednesday.
Only US dollar-rupee contracts with a size of $1,000 (Rs42,000) each will be allowed for trading. The contracts will be quoted and settled in the local currency with a maturity of not more than 12 months.
Guidelines: The membership of the currency futures market will be separate from that of the equity derivatives segment, RBI said
The membership of the currency futures market of an exchange will be separate from the membership of the equity derivatives segment or the cash segment, RBI said. Such an exchange will be subject to the guidelines of the capital market regulator.
The Bombay Stock Exchange, the National Stock Exchange and Multi-Commodity Exchange are in the race to set up the platform for such an exchange.
Currently, rupee currency futures are traded only on the Dubai Gold and Commodities Exchange.
Only a resident of India can participate in the trading and no other agency, including banks, can participate in the futures market without getting the approval of its concerned regulator.
A bank can become a trading or a clearing member of such an exchange provided it has capital and reserves worth Rs500 crore, 10% capital adequacy ratio, 3% or less net non-performing assets and has a three-year profit record.
Sebi said the limit on the gross open positions of a trader in such contracts should not exceed $25 million or 15% of the total open interest, or total number of open contracts. For banks, however, the gross open position limit is $100 million, or 15% of the total open interest.