Sebi tweaks client level position limits for currency derivative contracts

Sebi on Tuesday tweaked the client level position limits for trading in cross-currency futures and options contracts.

Position limit refers to the highest number of options or futures contracts an investor is allowed to hold on one underlying security.

Based on feedback received from stock exchanges and clearing corporations and upon a review of the same, it has been decided to revise the client level position limits, per stock exchange, Sebi said in a circular.

Gross open positions of the client across all contracts in the respective currency pairs will not exceed the limits set up by the regulator.

For USD-INR, Sebi said that gross open position across all contracts will not exceed 6 per cent of the total open interest or USD 20 million, whichever is higher. Earlier, this was USD 10 million.

In EUR-INR case, the gross open position across all contracts will not exceed 6 per cent of the total open interest or 10 million euros, whichever is higher. The limit was earlier fixed at 5 million euros.

With regard to GBP-INR, gross open position across all contracts will not exceed 6 per cent of the total open interest or 10 million pounds, whichever is higher. Earlier, limit was set at 5 million pounds.

For JPY-INR, Sebi said gross open position across all contracts will not exceed 6 per cent of the total open interest or JPY 400 million Japanese yen, whichever is higher. Previously, the limit was 200 million Japanese yen.

"The revised position limits shall also apply to Non-Resident Indians (NRIs) and Category II Foreign Portfolio Investors (FPIs) that are individuals, family offices, and corporates," Sebi said.

The position limits for Category I FPIs and Category II FPIs, other than individuals, family offices, and corporates, will continue to remain the same.

Sebi said that exchanges or clearing corporations may specify additional safeguards/ conditions, as deemed fit, to manage risk and to ensure orderly trading.

The revised limits will come into force with immediate effect, the Securities and Exchange Board of India (Sebi) said.

The cross-currency futures and options contracts are available for trading in various pairs. A currency future is a contract to exchange one currency for another at a specified date at the exchange rate fixed on the purchase date.