Business Daily from THE HINDU group of publications
Sunday, Jul 13, 2008
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Business Daily from THE HINDU group of publications Sunday, Jul 13, 2008 ePaper | Mobile/PDA Version | Audio |
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Forex Money & Banking - Derivatives Markets Exchange-traded currency futures likely to take off by mid-August The SEBI had in June approved the policy and regulatory framework for exchange-traded currency futures World over experience shows that the exchange-traded market is far easier to regulate, far easier to contain risk K.R. Srivats
New Delhi, July 12 Exchange-traded currency futures will become a reality in the Indian market in the next three-to-four weeks. “Work is in progress and we should be able to launch it by mid-August or latest by end of that month,” a Securities and Exchange Board of India (SEBI) official said. The SEBI Board had in June approved the policy as well as regulatory framework for establishment of exchange-traded currency futures. SEBI would take care of the operational part and the SEBI Chairman, Mr C.B. Bhave, has been authorised to decide on the exchanges that could trade this product, sources added. The stock exchanges have already been invited to apply for trading currency futures. A Standing technical committee, set up jointly by the Reserve Bank of India and the SEBI, had in end-May come out with a report listing the eligibility criteria for the exchanges to trade in currency futures. According to that report, the membership of the currency futures should be separate from the membership of the equity derivative segment or the cash segment of a recognized stock exchange. The report also spelt out the eligibility norms for clearing members. Meanwhile, official sources said that the same standing technical committee that went into exchange-traded currency futures has now commenced discussions on interest rate futures. A currency futures contract is a type of financial futures contract where the underlying is an exchange rate. A futures contract is a standardised contract, traded on an exchange, to buy or sell a certain underlying asset or an instrument at a certain date in the future, at a specified price. Where the underlying security happens to be a financial asset or instrument, the contract is referred to as “financial futures”. Currency futures are used primarily as a price-setting mechanism rather than for physical exchange of currencies. In India, currency futures are already allowed in the over-the-counter (OTC) market. But exchange-traded currency futures have so far not been allowed in view of the imperatives of the control on the capital account. However, in the context of increased capital account liberalisation, it is believed that exchange-traded currency futures could provide wider hedging opportunities to cope with market-induced currency movements. SEBI and RBI were seeing whether the OTC market could come on to the exchanges as all over the world the experience has been that the exchange-traded market is far easier to regulate, far easier to contain risk than the OTC market. Exchange-traded currency futures in 3 months Eligibility norms for exchange traded currency futures RBI moves forward on currency futures exchange Currency futures exchange welcomed More Stories on : Forex | Derivatives Markets
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