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Our Bureau

Mumbai, Sept. 5 Trade in currency futures on the NSE averaged 39,800 contracts a day this week, against 70,000 contracts recorded last Friday, on the first day of introduction of this instrument.

On Friday, the NSE reported trade of over 37,000 currency futures contracts.

It is members’ proprietary trades that are mainly contributing to the volumes; client participation is yet to pick up, said an analyst.

“At present, banks are using currency derivatives only for proprietary trading. One will see real liquidity once customers start accessing the markets. For this, the banks will have to put in place the necessary technology and make the required internal changes, which will take around two months’ time,” said Mr J. Moses Harding, Executive Vice-President & Head, Global Markets Group at IndusInd Bank.

“With the introduction of currency futures, individuals will get another asset class like equities to trade in, and the corporates will get another product to hedge their risks,” he added.

Attributing the high number of trades on the first day of trading to the initial enthusiasm of participants, Mr V. K. Khanna, General Manager, Treasury and International Banking, Union Bank of India, said: “The decline in the volume of traded contracts over the past week could be due to the rupee’s volatile movement. Established corporates understand the functioning of the markets well, but there is a need to raise customer awareness on the pros and cons as well as the risks involved in trading in derivatives.”

Companies now have an additional option to hedge their currency risks. Currency futures (of which only USD-INR is available on the NSE) do not involve delivery and are settled in Indian rupee. For actual foreign currency requirements, corporates have to book contracts in the OTC market.

Around 300 trading members including 11 banks had registered with the NSE as trading members for currency futures, said a statement from the exchange.

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