The three stock exchanges - NSE, MCX-SX and USE – had cumulatively recorded a currency derivative turnover of Rs 7.42 lakh crore in July, which was down 42 per cent from the preceding month, as per the latest data compiled by market watchdog Sebi.
The decline in currency derivative comes after market watchdog's move in early July to tighten the exposure limits for currency derivative to check large scale speculations in the market and help government stem fall in rupee value.
While National Stock Exchange and MCX-SX recorded second consecutive monthly decline in currency derivatives turnover, United Stock Exchange (USE) was the only bourse that witnessed a growth of nearly 5 per cent in this segment during August.
The volumes of currency derivatives trading on the three exchanges also fell by 25.3 per cent to 9 crore in August from 12.1 crore in July.
Individually, during August, the monthly turnover of currency derivatives at NSE decreased by 16.8 per cent to Rs 3.40 lakh crore as compared to Rs 4.09 lakh crore in July.
The number of currency derivative contracts on NSE dropped 22.8 per cent at Rs 5.17 crore in August from 6.70 crore in the previous month.
Further, at the country's newest stock exchange, MCX-SX, the currency derivative turnover fell by 25.1 per cent to Rs 2.33 lakh crore in August, Sebi said.
The volumes on the bourse as well declined substantially by 30.2 per cent to 3.53 crore contracts as against five crore trades on its platform in July.
The turnover for USE stood at Rs 22,989 crore in August, a rise of 4.99 per cent compared to Rs 21,896 crore in the previous month. However, the number of contracts on USE fell marginally by 1.36 per cent to 35.3 lakh.
As per Sebi's guidelines, the exposure to all currency contracts for a broker had been capped at 15 per cent of their overall exposure or $50 million, whichever is lower.
For clients, this cap is 6 per cent, or $10 million, whichever is lower.
Currency derivative contracts allow investors to take position on change in the foreign exchange rates between pairs of two currencies, such as rupee and dollar.