Mumbai: Banks and brokerages struck 5,000 contracts of $1,000 (Rs43,800) each in the first 10 minutes after finance minister P. Chidambaram launched currency futures trade on Friday on the National Stock Exchange (NSE).
Overall, 65,798 contracts worth $65.8 million of currency futures were traded, with near-month contracts dominating the first day of trading.
New step: Finance minister P. Chidambaram speaking at the inauguration of currency futures trading at the National Stock Exchange in Mumbai on Friday. Photograph: Punit Paranupe / Reuters
About 42,098 contracts were of futures expiring in September. Banks contributed 40% of the total gross volume.
The first trade on the exchange was made by East India Securities Ltd and among banks, HDFC Bank Ltd carried out the first trade, an NSE release said.
The largest trade was by Standard Chartered Bank, constituting 15,000 contracts.
Among the first deals struck, Standard Chartered bought 500 one-year contracts at 45 per dollar and Infosys Technologies Ltd sold 100 contracts for September at 43.8375 through ICICI Bank Ltd.
“We executed 231 trades in September position,” said V.K. Khanna, general manager, treasury and international banking for Union Bank of India, one of those banks that hit the platform in early morning trade.
According to some participants who did not wish to be named, banks that have overseas presence took advantage of the arbitrage opportunity between non-deliverable forward market in Singapore and the newly opened futures market in Mumbai.
“The volume size is such that the profit is very thin,” said a senior dealer with a large public sector bank, who also declined being named.
At present, only Indian residents are allowed to trade in US dollar.
“As soon as the regulators gain experience (in the functions of the market), they would consider how and when it could be further opened up for trading on other currencies as well,” Chidambaram said while launching the trading.
He also said foreign institutions and non-resident Indians will be allowed participation in due course.
“After this, we need to revitalize the exchange-traded interest rate derivatives market, we need to offer exchange-traded credit derivatives, and we need to strengthen the corporate bond market,” the finance minister said.
These three products are high on the priority list of the Union government and Chidambaram sought the support of the regulators to move forward.
Emphasizing the importance of the bonds, currency and derivatives markets, he said, “We should work towards removal of entry barriers to domestic corporate players and foreign financial firms in all segments of the financial services industry.”
The average daily turnover in the foreign exchange market has increased to $48.1 billion in 2007-08 from $25.8 billion in 2006-07, reflecting large international trade inflows.
India is the 17th largest foreign exchange and derivatives markets in the world.
According to Ravi Narain, chief executive officer of NSE, 11 banks and about 300 members have registered with the exchange for participating in the currency futures.
“Some of them may be completing paper work or other account opening related issues... within 10 days every player will be functional,” Narain said.
Brokers expect trading volumes to rise as they are getting inquiries from both retail and institutional clients.
“Today we were just checking the set-up,” said Monal Desai, head of institutional equity derivatives at brokerage Prabhudas Lilladher Pvt. Ltd.
“We have got lots of enquiries from both retail and institutional clients asking when the facility to trade would be available,” he said. Desai declined to specify the number of clients who made enquiries or the volume his firm traded.