Markets regulator Sebi today fixed position limit for brokers and institutional investors, operating in international financial services centres (IFSCs), for 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.
In a circular, Sebi said that “gross open position across all contracts not to exceed 15 per cent of the total open interest or $1 billion equivalent, whichever is higher”, for trading members, institutional investors and eligible foreign investors.
For other clients, open position across all contracts should not exceed 6 per cent of the total open interest or $100 million equivalent, whichever is higher. The stock exchanges would impose penalties for violation of position limits by these market participants.
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Trading in currency derivatives has been allowed on stock exchanges operating in IFSC. 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 exchange rate that is fixed on the purchase date.
Sebi had in March 2015 issued a detailed set of guidelines for establishing IFSCs as part of efforts for setting-up financial hubs in the country. The first such centre has been set up in Gujarat’s Gift City.