Monday, September 15, 2008

Currency Futures: New Financial Product in India

The Finance Minister dedicated to the financial services community, a new product - Currency Futures on 29th August, 2008. It has been set up be the National Stock Exchange (NSE).

Bombay Stock Exchange Limited (BSE) has also received in-principle approval from Securities and Exchange Board of India (SEBI) for setting up of an Exchange Traded Currency Derivatives Segment (CDS). The recommendations for Currency Futures has been laid down in the Report of the RBI-SEBI Standing Technical Committee on Exchange Traded Currency Futures, released by RBI & SEBI on May 29, 2008.

The worldwide average daily turnover in Exchange Traded Currency Derivatives has grown at a CAGR of approximately 23.2% as compared to the CAGR of 10.3% in the OTC Currency Derivatives market (the domestic OTC volume in Currency Derivatives is approximately US $34 billion per day.

The Exchange Traded Currency Futures (ETCF) contracts facilitates easy access, increased transparency, much needed efficient price discovery; enable better counterparty credit risk management, wider participation, trading of a standardised product and reduced transaction costs.

Currently, institutions like Banks, Insurance Companies, Corporates, SEBI Registered Brokers, Mutual Funds, participants in bullion markets and Individuals etc. are among those eligible for trading.
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