Trade in currency derivatives kickstarted at the National Stock Exchange (NSE) on Friday. The dollar-rupee futures received an overwhelming response from market participants with nearly 70,000 contracts trading on Day 1. Around 300 trading members including 11 banks traded in standardised contracts to exchange $1,000 at priced fixed now on a specified future date.
The first trade on the exchange was executed by East India Securities Ltd. HDFC Bank was the first bank to carry out the currency futures transaction. Banks contributed 40% of the total volume. The largest deal of 15,000 contracts was transacted by Standard Chartered Bank. The most active contract was the September 2008 expiry, trading around 43,000 contracts. Major contracts traded were in the near-term for September, October and November. There was also a good quantity of trading in the 11-month contact, July 2009, at 15,000. The near-month contract traded at a premium of 0.40% to the spot price at Rs 44.02 for one US dollar.
Golak C Nath, vice president & economic advisor at Clearing Corporation of India, said, ?We saw mostly large brokers coming forward to trade. It made a good beginning, but it is difficult to say how the market churns out eventually.?
Multi Commodity Exchange of India and Bombay Stock Exchange also have received in-principle approval to offer exchange-traded currency futures. ?Once these exchanges are in, there would be enough liquidity in the market,? Nath added.
The trading limit for individuals is $5 million and for trading members is $25 million, much lesser than the size of around $200-$300 million in daily trade in forwards market by a small bank daily. Foreign institutional investors are excluded from the market at present. The over-the-counter transactions still dominate the foreign exchange market in India. The avarege transaction touched the $48-billion mark in 2007-08 as against $25.8 billion in 2006-07, signifying a growth in volumes.