The much-awaited trade in currency futures will commence from August 29 on the National Stock Exchange (NSE), India ?s biggest stock exchange. NSE received an in-principle approval from the regulator for this last week. NSE launched mock session in currency futures with participation from its existing members, numbering around 300, in the equity and derivatives segment on Wednesday in a one-hour window from 4.30 pm to 5.30 pm.
Rival Bombay Stock Exchange (BSE) also has completed the formalities for the launch of the product and is awaiting Sebi inspection, sources familiar with the development said.
Exchange-traded currency futures are standardised contracts to buy or sell one currency against another on a specified future date, at a price specified on the purchase or sell date. An official of NSE said, ?About 70-80% of our 1,000 odd brokers have shown interest in currency futures. Banks (most of them public sector banks), and a large number corporates have also shown interest.?
Bijay Murmuria, president of the Association of NSE Members in India (Anmi), said, ?The response from the members is positive and around 150 members of the association comprising all big broking firms have already registered. Derivatives are good for better price realisation and it is a very good opportunity for brokers to add to their income. Even jobbers and arbitragers are really seeing this as an opportunity.?
The biggest competition for exchange-traded currency futures will be an already active over-the-counter (OTC) market in currency forwards with an average daily turnover of $34 billion. Currency futures includes 12 monthly contracts of size $1000, a minimum tick size of 0.25 paise and cash settlement in Indian rupee. The clearing, settling and risk management (based on the value at risk methodology) will be undertaken by NSCCL, the clearing house of the exchange. The trading hour will be from 9 am to 5 pm. Though Individuals, banks and corporates are allowed to trade in currency futures, foreign players are not allowed to participate.