Kolkata: The Bombay Stock Exchange is planning to launch Exchange Traded Currency Futures (ETCF) contracts by early September after SEBI officials inspect its system next week.
“Securities and Exchange Board of India (SEBI) will come next week to inspect our system, which is already in place, and we hope to launch the future contracts in currency by end of August or early September,” the outgoing BSE managing director and CEO Rajnikant Patel told PTI.
“Currency futures segment will be managed by a separate division of the exchange under a different structure and regulatory set-up. It will also have separate settlement from stock futures and cash segment as well as fresh set of members to participate in the currency futures market,” Patel said.
BSE has already applied with SEBI for setting up the currency derivatives segment and is in line with the recommendations made by RBI-SEBI Standing Technical Committee report on currency futures which was released in May.
It was also exploring strategic arrangements with entities in the forex market to gather domain expertise. Strategic arrangement with established entities in the forex market would ‘lend reach, domain expertise and an active participation to this evolving segment.´
The ETCF contracts would facilitate more transparency, efficient price discovery, enable better counter party credit risk management, wider participation and reduced transaction costs.
At present, currency future contracts are available to the Indian corporates as over-the-counter (OTC) products.
The domestic OTC volume in currency derivatives is about $24 billion per day. Exchange traded futures will have greater flexibility for the corporates for hedging their currency risk.
Initially only future contracts on US dollar-Indian rupees would be available. This means, the investors can hedge themselves when the exposure is in US dollar only.
The minimum contract size will be $1,000.
SEBI guidelines also state that the currency future contract would have maximum maturity of 12 months with varied maturity from 1 month to 12 months will be available. The currency future would be settled in Indian rupees only and settlement price would be RBIs reference rate on the last trading date.
More entities like Multi Commodity Exchange and National Stock Exchange have also applied for ETCF licences.
Meanwhile, Patel said, he has also asked the BSE board to release him from his responsibility as soon as possible.
He has already tendered his resignation from his post and the board has accepted it.
In his first official comment to the media since his resignation, Patel termed his seven year tenure in BSE as ‘most challenging and satisfying.´