RBI working on guidelines for currency futures trading

RBI working on guidelines for currency futures trading

Mumbai: The Reserve Bank of India is working on the regulatory guidelines for futures trading in currency but no time-frame has been fixed for its implementation.

“We have received several suggestions on currency futures from market participants. These will be studied and executed at an appropriate time," RBI Deputy Governor S Gopinath said at a conference on derivatives here today.

The apex bank had set up a working group early this year to study the issue and had received suggestions from several quarters, she said.

However, she made it clear that there is “no time-frame" for implementing the proposal.

The currency futures trading will enable individuals and institutions to hedge and trade their Indian rupee risk on a transparent and equal basis.

In its 2007-08 annual monetary policy, the banking regulator had recommended the constitution of the working group for “an extensive consultation with the market participants to operationalise the proposal in line with the current legal and regulatory frame work".

Concerned over the increased volume of Non-Deliverable Forward Market (NDF) instruments in the market, the apex bank is understood to be thinking of allowing more trading instruments for market participants.

NDF is an instrument based on the rupee-dollar exchange, which is traded in international financial centers, where the RBI does not having much control over the instrument.

In order to improve the risk management mechanism of the participants, the apex bank had recently permitted banks and primary dealers to do transactions in single-entity Credit Default Swaps (CDS).