August 20, 2008


Currency Derivatives Segment at NSE



RBI and SEBI jointly constituted a Standing Technical Committee (“Committee”) to inter-alia evolve norms and oversee implementation of Exchange Traded Currency Derivatives. The Committee submitted its report on Exchange Traded Currency Futures on May 29, 2008. Further RBI and SEBI also issued circulars in this regard on August 06, 2008.


The report referred above, laid down the framework for the launch of Exchange Traded Currency Futures in terms of the eligibility norms for existing and new Exchanges and their Clearing Corporations/Houses, eligibility criteria for members of such Exchanges/Clearing Corporations/Houses, product design, risk management measures, surveillance mechanism and other related issues.


In India, there is an active OTC market for forwards with an average daily turnover of USD 34 billion. World over, Exchange traded currency derivatives are also available and around 334 million contracts get traded annually. For the first time in India, it would be now possible to trade on the currency futures on an Exchange platform. With electronic trading and efficient risk management systems, Exchange traded currency future is expected to benefit the universe of participants including corporates and individual investors. Banks are also allowed to become members of this segment on the Exchange and this provides them new opportunity in this market segment.


NSE is the first exchange to have received an in-principle approval from Securities and Exchange Board of India for setting up currency derivative segment.  In today’s globalised and integrated business environment, many entities irrespective of the nature of its business are impacted by currency risk either directly or indirectly. Exchange traded currency derivatives market provides excellent opportunity to hedge currency risk for different kinds of participants. The nationwide trading facility with the back-bone of rugged clearing mechanism, will therefore be found beneficial by the various participants.


All the trades done at National Stock Exchange are cleared settled and risk managed by National Securities Clearing Corporation (NSCCL). NSCCL is set up as a separate and independent entity. The practices and principles followed at NSCCL are globally benchmarked.  NSE has conducted around 15 road shows attended by more than 2000 participants across the country.


Mock trading sessions for the Currency Derivatives segment has started from today.  More than 300 members including banks participated very actively in the mock session.


The Currency Derivatives segment at NSE will go live on August 29, 2008.