NSE to start live trading in currency futures

THE National Stock Exchange (NSE) has announced the launch of trading in currency futures from August 29. For the first time in India, it would be now possible to trade on the currency futures on a stock exchange platform. Currency futures are standardised foreign exchange contracts traded on a recognised stock exchange to buy or sell one currency against another on a specified future data, at a price specified on the purchase or sale data. Currently, RBI has approved only USD-INR currency futures to be traded on the approved exchanges. The size of the contract would be $1,000 and the contracts would expire on the last business day of any month at 12 noon. The contracts will be quoted and settled in rupees and the settlement price of the contract would be RBI's reference rate on the last trading day. This is expected to benefit participants such as corporates and individual investors, and also banks that are allowed to become members of this segment. However, at the moment foreign institutional investors (FIIs) and non-resident Indians (NRIs) would not be permitted to trade on the segment. The NSE is the first exchange to have received an inprinciple approval from Sebi to set up a currency futures segment. All trades done on the exchange would be cleared, settled and risk-managed by National Securities Clearing Corporation (NSCCL), which is set up as a separate and independent entity. In India, there is an active OTC market for forwards with an average daily turnover of $34 billion. World over, exchange-traded currency derivatives are also available and around 334 million contracts get traded annually.