The Hindu Business Line : Currency futures gain strength on volatile rupee

Mumbai, Nov. 28 The race between the National Stock Exchange and MCX Stock Exchange (MCX SX) to achieve leadership position in currency futures has turned hot in the last few weeks, with the rupee turning volatile as the bellwether Sensex.

MCX-SX, launched about a month after NSE started its currency derivative trading, seems to be strengthening its armour by appointing senior officials from the Securities and Exchange Board of India (SEBI) and IDBI Bank.

Mr U. Venkataraman, Chief Executive Officer, MCX-SX, said experienced hands always contribute to building world class institutions and the exchange was attracting the best talent after following all due diligence processes and formalities.

“There have been instances in the past where the original team of IDBI worked with SEBI and finally joined NSE to become its founding team. We have experts joining us from the best exchanges and regulators from across the globe,” he said without naming the SEBI official who has just joined the MCX-SX.

Membership

According the SEBI’s data, 1,030 entities have registered either as trading or clearing members. Of this, NSE had managed to attract 470 entities, MCX 403 members and BSE has 157 members.

“We now have 376 members (excluding clients) registered with SEBI and another 494 application for membership is still pending,” he said.

MCX-SX, with its strong parentage, is aiming to double its membership with the strong pipeline of application pending with it.

The NSE too is looking to strengthen its member base further, “We are expecting to raise our membership to 500 by early next year,” said a NSE official.

Turnover

MCX-SX for the first time overtook NSE turnover on November 11 and it has been a neck-to-neck race ever since between the two exchanges.

On November 21, MCX-SX registered a turnover of Rs 1,254 crore while it was Rs 1,135 crore on the NSE. On the next day, NSE bounced back to record a turnover of Rs 1,014 crore and MCX-SX’s was Rs 927 crore.

Importers, exporters and commodity market participants naturally require currency hedging and at the other end, the remaining market participants would bring the required liquidity and depth to the market, said Mr Venkataraman.

The functions of price risk management and price discovery in currency rates will continue to attract commodity futures members, he added.

Currency market till recently was highly institutionalised with access only to banks and authorised dealers. With the launch of a currency derivatives platform, the Government has opened the doors for small and medium enterprises, importers, exporters and real hedgers.

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