RBI lets FPIs access currency derivatives
21 Jun 2014 11:20 PM GMT
To enhance the depth of the foreign exchange market, the Reserve Bank of India on Friday allowed foreign portfolio investors to participate in the domestic exchange-traded
currency derivatives.
At the same time, domestic players like exporters and importers would now require underlying exposure if they position beyond $10 million.
‘It has now been decided to allow foreign portfolio investors (FPIs)...to access the currency futures or exchange traded currency options for the purpose of hedging the currency risk arising out of the market value of their exposure to Indian debt and equity securities,’ RBI said.
Such foreign investors can participate in the currency futures or exchange traded
options market through any registered trading member of the exchange concerned, it said. FPIs can take position in foreign currency up to $10 million or equivalent per exchange without having to establish existence of any underlying exposure, it said, adding position beyond $10 million in any exchange will require an underlying exposure.
Requirement of an underlying exposure has been placed to check speculation in the currency market. The onus of ensuring the existence of an underlying exposure would
rest with the FPI concerned, it said. In a separate notification, RBI said domestic participants would be be allowed to take position upto $10 million per exchange without having to establish the existence of any underlying exposure.
Domestic participants who want to take a position exceeding $10 million in the exchange-traded currency derivatives market will have to establish the existence of an underlying exposure, it said.
For the purpose of convenience, it said, exchanges may prescribe a fixed limit for the contracts in currencies other than dollars such that the limit is within the equivalent of $10 million.
‘In terms of the present regulatory framework, domestic participants in the currency futures and exchange traded options markets are not required to have any underlying exposure, while requirement of underlying is mandatory for taking a position in the over-the-counter derivatives markets,’ it added.
currency derivatives.
At the same time, domestic players like exporters and importers would now require underlying exposure if they position beyond $10 million.
‘It has now been decided to allow foreign portfolio investors (FPIs)...to access the currency futures or exchange traded currency options for the purpose of hedging the currency risk arising out of the market value of their exposure to Indian debt and equity securities,’ RBI said.
Such foreign investors can participate in the currency futures or exchange traded
options market through any registered trading member of the exchange concerned, it said. FPIs can take position in foreign currency up to $10 million or equivalent per exchange without having to establish existence of any underlying exposure, it said, adding position beyond $10 million in any exchange will require an underlying exposure.
Requirement of an underlying exposure has been placed to check speculation in the currency market. The onus of ensuring the existence of an underlying exposure would
rest with the FPI concerned, it said. In a separate notification, RBI said domestic participants would be be allowed to take position upto $10 million per exchange without having to establish the existence of any underlying exposure.
Domestic participants who want to take a position exceeding $10 million in the exchange-traded currency derivatives market will have to establish the existence of an underlying exposure, it said.
For the purpose of convenience, it said, exchanges may prescribe a fixed limit for the contracts in currencies other than dollars such that the limit is within the equivalent of $10 million.
‘In terms of the present regulatory framework, domestic participants in the currency futures and exchange traded options markets are not required to have any underlying exposure, while requirement of underlying is mandatory for taking a position in the over-the-counter derivatives markets,’ it added.
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