With an aim to help the Government in its efforts to stem the rupee fall, the Securities and Exchange Board of India has tightened the exposure norms for currency derivatives to check large-scale speculations in the market.

The decision was taken late last night in consultation with the Reserve Bank of India, which regulates the entire gamut of capital markets, including trading in currency derivatives.

Currency derivatives trading allows traders and investors to take forward their views on various currency pairs, including rupee-dollar, and it was being felt that large-scale speculation on their future movements might be adding to the downward pressure on the Indian currency, which fell to a record below 61 level against the US greenback yesterday.

Exposure on currency contracts

SEBI said in a circular that it is reducing the exposure that brokers and their clients can take on currency derivatives and also doubled their margins on dollar-rupee contracts.

The exposure for brokers to all currency contracts has been capped at 15 per cent of their overall exposure or $50 million, whichever is lower. For clients, the cap would be 6 per cent or $10 million, whichever is lower.

SEBI said that the new norms would be applicable with effect from July 11 and the changes have been decided in consultation with RBI “in view of the recent turbulent phase of extreme volatility in USD-INR exchange rate.

Exposure limit

The current exposure limit for brokers and clients was 15 per cent of their overall exposure or $50 million, and 6 per cent or $10 million, respectively.

The margin requirements are different across various categories and they are being increased by 100 per cent of the present rates for rupee-dollar derivative contracts.

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