Indian Authorities consides easing currency derivatives trading

The Securities and Exchange Board of India (SEBI) is the regulator for the securities market in India. It was established in the year 1988 and given statutory powers on 12 April 1992 through the SEBI Act 1992. In conjunction with The Reserve Bank of India, India’s Central Banking Institution, which controls the Monetary Policy of the Indian Rupee plan on easing standards for currency derivatives trading as reported by India’s The HinduBusinessLine’s Shishir Sinha.

“The two regulators are working together to relax the open position limit and extend the time for the market. Circulars in this regard are expected to be out very soon,” a highly-placed source told BusinessLine.

The current standard for derivatives trading in the futures and options market is still quite premature compared to international standards. Futures trading can be conducted in four currencies – dollar, euro, pound and yen – while options trading can be done only in dollars.

Intended Development

To raise the open position limit since the markets are perceived to have reached stablility. This comes as  a development from about a year ago when SEBI revised the position limits for exchange traded currency in consultation with the RBI with the aim of curbing unpredictability.

Accordingly, the gross open position of a client across all contracts will not exceed 6% of the total open interest or $10 million/€5 million/£5 million/¥20 million (whichever is higher). At the same time, the gross open position of a trading member, who is not a bank, across all contracts, has been capped at 15% of the total open interest or $50 million/€25 million/£25 million/¥1000 million (whichever is higher).

Also proposed is an extension in trading for currency derivatives till 7.30 p.m. instead of 5 p.m. Exchanges — BSE, NSE and MCX-SX — have been requesting expansion of exchange hours to encourage market members to alter and adjust their positions in accordance with currency movements in global markets.

Longer trading hours will also assist in controlling sharp volatility in currency markets abroad, such as Singapore, where domestic regulators have no control.

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