The Bombay Stock Exchange (BSE), in keeping with its tradition of offering the best of technology, services and products, is launching its foray into yet another exciting segment – Currency Derivatives. Taking up on the initiative taken by the Reserve Bank of India and the SEBI to launch Currency Futures in India, the BSE launches US Dollar – Rupee Currency Futures trading from today.

Currency hedging in India will no longer be limited to the over-the-counter (OTC) products, such as forwards, swaps and options. As this market has a promising potential for integration of the Indian economy with the rest of the world, with the ongoing development of financial markets, introducing currency derivatives will provide one more platform alongside the OTC currency markets increasing market efficiency.

Certain product features are a daily mark-to-market settlement on a T+1 basis with the final settlement on the contract expiry date which would generally be the T+2 day from the last trading day of the contracts as specified by the Exchange. The contracts with a minimum contract size of USD 1000 and in same multiples thereafter will be traded online through the Currency Derivatives platform BSE-CDX, which will be available for trading between 9 a.m. and 5 p.m., Monday through Friday. BSE invites banks and forex brokers to join in as participants in this exciting new market as Trading or Trading–cum-Clearing Members with nominal fees.

Worldwide, the average daily turnover in Exchange Traded Currency Derivatives has grown at a CAGR of approximately 23.2% as compared to the CAGR of 10.3% in the OTC Currency Derivatives market (the domestic OTC volume in Currency Derivatives is approximately US $34 billion per day). The Exchange Traded Currency Futures (ETCF) contracts facilitate easy access, increased transparency, much needed efficient price discovery; enable better counterparty credit risk management, wider participation, trading of a standardised product.

Expressing his optimism, Mr. M. L. Soneji, Chief Operating Officer, BSE, said, “In today’s globalised and integrated business environment, many entities irrespective of the nature of its business are impacted by currency risk either directly or indirectly. Exchange traded currency derivatives market will provide excellent opportunity to hedge currency risk for different participants. Additionally we are offering the unique feature of buying positions in one month and selling in the next.  We expect encouraging volumes to take place on this new platform.”

BSE’s Training Institute (BTI) has already launched training programs in Currency Futures to educate investors and develop expertise amongst dealers and market participants. A Certification Program for Currency Derivatives has also been launched by the BTI as it is mandatory for all participants to possess the certification before commencing trading. 

Sourced From: BSE Ltd