RBI allows currency options trading for residents

Excerpts from India Business Hour on CNBC-TV18 Watch the full show » Nifty BSE | NSE 10/02/12 Are Mutual Funds betting on Nifty?

In order to increase the menu of hedging tools, the Reserve Bank of India and the Securities and Exchange Board of India have finally come out with the much awaited guidelines on currency options, reports CNBC-TV18's Latha Venkatesh.

Both, the SEBI chairman and the RBI governor have been saying that these rules are imminent. And, on Friday, currency options was officially okayed by both the regulators. The trading in this, however has been allowed only for residents.

As per the guidelines the underlying shall be USD/Rs spot rate with a minimum size of USD 1,000. The options will be premium styled European call and put options and will have to be quoted and settled in rupee. The price of the settlement however will be RBI's reference rate on date of expiry.

Who can trade?

• Traders registered with SEBI for currency futures
• Stock exchanges and clearing corporations with RBI authorisation under FEMA.
• Banks who have the RBI nod: Banks with minimum networth of Rs 500 crore and CRAR of 10% will be allowed. They also require to have net non-performing assets of not more than 3% along with a three-year profit record.

The option may be launched by the exchanges any time soon.