1

1rading in ourrenoy
future

CURRENCY FUTURES

T S CURRENCY FUTURES
transferable futures oontraot that speoifies
the prioe at whioh a speoified ourrenoy oan be
bought or sold at a future date. Currenoy future
oontraots allow investors to hedge against
foreign exohange risk.

HISTORY
OF CURRENCY FUTURES
Currenoy futures were first oreated at the
Chioago Meroantile Lxohange (CML) in 197
nternational Monetary Market (MM) launohed
trading in seven ourrenoy futures on May 16,
197.

CURRENCY FUTURES IN INDIA

Currenoy futures trading was started in Mumbai ugust 9,
.
with over trading members inoluding 11 banks registered
in this segment, the first day saw a very lively oounter, with
nearly 7, oontraots being traded.
1he first trade on the N3L was by Last ndia 3eourities Ltd
mongst the banks, UlC Bank oarried out the first trade. 1he
largest trade was by 3tandard Chartered Bank oonstituting
1, oontraots. Banks oontributed peroent of the total
gross volume.
6
FUNDENTS OF NDN CURRENCY
FUTURES
lour ourrenoy pairs are allowed to be traded (0riginally in
ugust , only u3U-NR was allowed. lrom 19.1.1,
three more ourrenoy pairs namely, LuR-NR, 0BP-NR and
1P-NR are allowed by RB).
1he oontraots shall be quoted in ndian Rupees. owever,
the outstanding position would be reported in the
respeotive foreign ourrenoy.
ll the oontraots would be oash settled in ndian Rupees
1he maximum maturity of the oontraots shall be 1 months
ll monthly maturities from one to 1 months would be
made available
Contraot trading oyole: ll the futures oontraots of four ourrenoy
pairs will have a 1 month trading oyole. new oontraot will be
introduoed after 1 noon on the last trading day of the near
month oontraot.
Lxpiry day & time: ll the futures oontraots of four ourrenoy
pairs shall expire at 1 noon, two working days prior to the last
business day of the expiry month.
0rder quotation: while u3 dollar, Luro and Pound 3terling will
be quoted for one unit of foreign ourrenoy in ndian rupees, for
1apanese en, the quotation will be for 1 1P in ndian
rupees.

Permitted lot size: lor u3U, LuR and 0BP, the lot size will be
1, foreign ourrenoy, for 1P it will be 1,, 1P (sinoe
quotation is for 1 1apanese en, lot size on trading system
shall be 1, 1P)
0rder plaoement: Members shall plaoe orders in terms of
number of lots 1he settlement prioe shall be RBs Referenoe
Rate on the last trading day for u3U and Luro. lor 0BP and 1P,
the settlement prioe shall be exohange rate published by the
Reserve Bank in its Press Release oaptioned RB Referenoe
Rate for u3U and Luro."
0n stook exohanges the trade timings would be from 9 a.m. to
p.m.
lNL 3L11LMLN1 U: 1he oontraot would expire on the last
working day (exoluding 3aturdays) of the month. 1he last
working day would be taken to be the same as that for
nterbank 3ettlements in Mumbai. 1he rules for nterbank
3ettlements, inoluding those for 'known holidays and
'subsequently deolared holiday should be those as laid down
by lLU.
1
TRDE EXCNGES FOR CURRENCY
FUTURES
1here are trade exohange that trades in
ourrenoy futures
1. National 3took Lxohange (N3L)
. Bombay 3took Lxohange (B3L)
. Multi-Commodity Lxohange (MCX)
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!ORTNCE OF CURRENCY
FUTURES
ooording to market analysts, introduotion of ourrenoy
futures in the ndian market will give oompanies
greater flexibility in hedging their underlying ourrenoy
exposure and will bring in more liquidity into the
market as ourrenoy future or forex derivative oontraot
will enable a person, a bank or an institution to buy or
sell a partioular ourrenoy against the other on a
speoified future date, and at a prioe speoified in the
oontraot.
DFFERENCE OTC & CURRENCY
FUTURES
OTC MARKET CURRENCY
FUTURES
CONTRCTS Customized Standard
CCESEEBTY ow igh
UNDERYNG
EX!OSURE
Required Not Required
!RCE
TRNS!ERNCY
ow igh
QUDTY Subject to Credit imits igh
COUNTER!RTY
RSK
Yes itigated through
Clearing Corporation
SETTEENT !hysical Delivery Net settled in NR
OTC MARKET CURRENCY FUTURES
RTE
TRNS!RENCY
NO REBE SOURCE
TO VERFY TE CTU
FORRD !REU
RTES
NTONY
BRODCSTED RTES
T NBUT
FORRD !REU
COST TRNS!RENCY COST S VRBE
SUBJECT TO CO!NY
!ROFE, QUNTTY OF
RETTNCE ND
BNK S!ECFC
!OCES
!REDETERNED COST
RRES!ECTVE OF
CO!NY !ROFE
ND QUNTTY OF
RETTNCE
COUNTER!RTY RSK NO REGUTORY
GURNTEE
TGTED TROUG
EXCNGES
UNDERYNG
EX!OSURE
REQURED NOT REQURED
OTC MARKET CURRENCY
FUTURES
ORDER EXECUTON GENERY OFFNE,
N!!RORTE DEYS
DURNG VOTE
!RCE OVEENTS
ONNE ORDER
EXECUTON ND
EDTE !RCE
CONFRTON
RRES!ECTVE OF
VOTE !RCES
O!TU UTSTON
OF RKET TNGS
ORDERS EXECUTON S
SUBJECT TO
VBTY OF
DEERS N ERY
ORNNG ND BNK
TRESURY COSNG
TNGS
ORDERS CN BE
EXEUCTED NY TE
BETEEN 9.00 TO
5.00 ! (ONDY TO
FRDY)
DYNC EDGNG NOT !OSSBE TRESURY NGERS
CN TKE BUY S E
S SE !OSTONS
RRES!ECTVE OF
TER EX STTUS
!RCTC USTRTON:
n Exporter has confirmed an order for his goods and is
likely to receive the payment USD 100000/- in July 2011
e should take a position of SE USD/NR 100000/- in
futures market @ prevailing rate of July 2011 contract
n July 2011 when he receives the actual payment he should
square up his position (BUY USD/NR 100000/-) Futures
market @ prevailing rate of July 2011.
EX!ORT EDGNG
!ORT EDGNG
!RCTC USTRTON:
n mporter has confirmed an order for his goods and is
likely to make the payment USD 100000/- in July 2011
e should take a position of BUY USD/NR 100000/- in
futures market @ prevailing rate of July 2011 contract
n July 2011 on the due date he should make the actual
payment from the bank at spot rate and at the same time
should square up his position (SE USD/NR) in
Futures market at prevailing rate of July 2011.
1NK 0u