Eyes on offshore currency market as NSE, BSE start trading rupee-dollar derivative on subsidiaries

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Updated: May 09, 2020 9:58 AM

The National Stock Exchange’s subsidiary NSE IFSC and the Bombay Stock Exchange’s India INX on Friday launched trading in the Indian Rupee-US Dollar Futures & Options contact.

Rupee plunges 84 paise to 75.10 against dollar amid coronavirus scareIndia INX has a cumulative turnover of over $840 billion as on April 30, 2020 and a market share of around 90% in Gift IFSC for April 2020.

The National Stock Exchange’s subsidiary NSE IFSC, and the Bombay Stock Exchange’s India INX on Friday launched trading in the Indian Rupee-US Dollar Futures & Options contact. The move will help the India financial markets tend to the demand for Indian Rupee in the offshore market, and create a vibrant forex market back home in India. Rupee derivative was launched by the Finance Minister Nirmala Sitharaman digitally. “Rupee derivatives in IFSC would help in creating a vibrant forex market in India. This will also play an important role to bring the offshore rupee market back to India and strengthen price discovery in Indian markets,” said Vikram Limaye, MD and CEO, NSE.

The major participants in rupee derivatives contracts at NSE IFSC shall include Foreign Portfolio Investors (FPI), Corporations, IFSC Banking Units (IBUs) trading members, Global banks & custodian and Non-Resident Indians. “The size of the global offshore Rupee Dollar derivatives markets is significant with reported volumes close to to USD 50 billion per day,” said Chairman, India INX, Ashishkumar Chauhan. India INX has a cumulative turnover of over $840 billion as on April 30, 2020 and a market share of around 90% in Gift IFSC for April 2020. “India INX can potentially raise USD 1 trillion in the next ten years for Indian government and corporates to help in economic development of the country,” Chauhan added.

The IFSC platforms will be accessible to those currently trading the Indian Rupee in various offshore markets including international investors along with non-resident participants. The average daily volumes for rupee in the U.K. soared to $46.8 billion in April 2019, a more than fivefold jump from $8.8 billion in 2016. According to a study conducted by the Bank of International Settlements last year, Rupee trading — including spot, outright forwards, foreign-exchange swaps, and other products — also jumped in Singapore, Hong Kong and the United States between 2016 and 2019.

Long trading hours and USD settlement at exchanges would also help to improve access for overseas participants. “Our (India INX) uniqueness is that we are the only exchange open for trading for 22 hours in a day in this entire region,” said V Balasubramaniam, MD & CEO, India INX. NSE IFSC, launched in 2017, currently offers trading in various products including in Index Derivatives (including derivatives contracts on NIFTY 50 and NIFTY Bank indices), Stock Derivatives, Currency Derivatives, Commodity Derivatives and Debt Securities.

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