RBI issues norms for currency futures

RBI issues norms for currency futures

Reserve Bank of India (RBI) today issued guidelines on currency futures, and limited the participation to person resident in India as defined in section 2 (v) of Foreign Exchange Management Act, 1999.

According to a release issued by the central bank today, the norms will be effective August 6.
"Currency futures means a standardised foreign exchange derivative contract traded on a recognised stock exchange to buy or sell one currency against another on a specified future date, at a price specified on the date of contract, but does not include a forward contract," the release said.

The standardised currency futures shall have the following features:
a. Only USD-INR contracts are allowed to be traded.
b. The size of each contract shall be $1000.
c. The contracts shall be quoted and settled in Indian Rupees.
d. The maturity of the contracts shall not exceed 12 months.
e. The settlement price shall be the Reserve Bank’s Reference Rate on the last trading day.

The release added that the membership of the currency futures market of a recognised stock exchange shall be separate from the membership of the equity derivative segment or the cash segment. Membership for both trading and clearing in the currency futures market shall be subject to guidelines issued by Securities and Exchange Board of India (Sebi).

"Banks authorised by the Reserve Bank of India under section 10 of the Foreign Exchange Management Act, 1999 as ‘AD Category - I bank’ are permitted to become trading and clearing members of the currency futures market of the recognised stock exchanges, on their own account and on behalf of their clients, subject to fulfilling the following minimum prudential requirements:

a) Minimum net worth of Rs 500 crore.
b) Minimum CRAR of 10 per cent.
c) Net NPA should not exceed 3 per cent.
d) Made net profit for last 3 years.

Securities and Exchange Board of India (Sebi) also issued a notification on currency futures, and said gross open position of a trading member across all contracts shall not exceed 15% of the total open interest or $25 million, whichever is higher.

"Gross open position of a trading member, which is a bank, across all contracts, shall not exceed 15% of the total open interest or $100 million, whichever is higher," an official release said.

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Source: UTVi, ET