Skip to main content

Sebi Considers Proposal on Cross Currency Futures Pairs

By
Punters could soon get to trade in cross-currency futures pairs at a much cheaper cost on local bourses. Capital market regulator the Securities and Exchange Board of India (Sebi), which regulates currency derivatives jointly with the Reserve Bank of India (RBI), is mulling a proposal by stock exchanges to offer these pairs in addition to dollarand eurorupee futures they currently offer.
“We are considering the proposal as we want to introduce new products and are in discussions with the RBI,“ said a regulatory official aware of the development.
“Once the central bank approves it, exchanges could launch cross-currency pairs like dollar-euro, dollar-pound and dollar-yen.“
Currency derivatives were launched first on NSE and the erstwhile MCX Stock Exchange, now MSEI, in 2008.Currently , punters can take a view on how the rupee will move against the dollar, euro, yen and pound on bours es like NSE, BSE and MSEI.
Currency brokers like Suresh Nair, director at Admisi Forex, said, if allowed, the move would reduce one leg of a transaction for traders and reduce transaction costs.
For instance, if one has a view that the dollar would rise against the euro, currently she has to sell the rupee and buy the dollar, or go long dollar-rupee.In the second leg she sells the euro and buys the rupee, effectively making her long dollar and short euro.
If bourses launch new cross-currency pairs, a trader who feels the dollar would rise versus the euro could simply go long dollar and short euro. This will save her brokerage on the extra leg and reduce transaction costs, too.
“At times it has been observed that the dollar, while not exhibiting much movement against the rupee, moves sharply against the euro or the yen. If one wants to take a future view on the dollar-euro or dollar-yen, they would have to either longshort dollar-rupee and shortlong euro-rupee. If indeed the RBI permits new cross-currency pairs for being traded, it will increase interest in currency derivatives and raise the combined turnover of all the exchanges,“ said Harish Galipelli, head of currency at Inditrade Derivatives & Commodities.
While regulators approved curren cy derivatives primarily to offer an alternate and cheaper hedging option, than the OTC market, to small and medium scale industry, brokers say, it has been largely a speculative play, with proprietary trades accounting for almost 60% of turnover.
Jamal Mecklai, CEO of Mecklai Financial, a forex consultancy , attributes this to an SME having to eventually convert its forex inflow or outflow with an authorise dealer (bank), where it might not get as attractive a rate it does for hedging in the futures market. Besides, on the futures market liquidity is restricted to the front and the next month contracts; far month contracts being relatively less traded. “Cross-currency futures will probably attract more punters than genuine users as the current experience proves,“ added Mecklai.
In the week through Friday, combined currency derivatives turnover of NSE, BSE and MSEI (erstwhile MCX-SX) was ` . 1.22 lakh crore. NSE led with a market share of around 62%, BSE at 32.5% and MSEI the rest.
The Economic Times, New Delhi, 14th Sept. 2015

Comments

Post a Comment

Popular posts from this blog

Govt’s gamble on GST cuts: What do the bond and currency markets signal?

By
  It’s not just humans who suffer from cognitive biases; markets do too. Interestingly, different financial markets exhibit distinct biases, each interpreting events through its own prism of prejudice. Take the recent announcements on GST reforms: equity markets have chosen to view them through the lens of growth, while bond and currency markets are focusing on potential macroeconomic risks—fiscal pressures and current account challenges. So, which lens captures the true pulse?Equity markets may be right in expecting GST reforms to revive consumption, which has remained lacklustre for a while. But the key question remains—will this revival come at the cost of broader macro stability?It is well known that consumption stocks have rallied since the GST rationalisation announcement. But what about bond markets? What signals are they sending since this rejig was announced from the ramparts of the Red Fort?The signs aren't encouraging. Bond prices have slumped and yields have surged sinc...
Post a Comment
Read more

Luxury carmakers urge clarity on GST rates to boost festive season sales

By
  A clear picture regarding new GST rates at the earliest will help the overall auto industry, including the luxury car segment, to regain momentum in the ongoing quarter, which generally sees enhanced sales on account of the festive season.The high-powered GST Council, chaired by Finance Minister Nirmala Sitharaman, will meet on September 3-4 to discuss moving to a two-slab taxation.In an interaction with PTI, BMW Group India President and CEO Hardeep Singh Brar said the recent speculation about the change in GST rates has caused uncertainty in the minds of consumers.Consumer interest and demand is strong, but they (prospective buyers) have adopted a wait-and-watch approach, and this delayed decision-making is impacting new vehicle sales at a certain level, he noted."Expediting clarity on GST rates is essential to get back to speed and ensure the auto sector's contribution to economic growth during this quarter is robust," Brar stated.He also hoped that the sustainable p...
Post a Comment
Read more

Sebi proposes tighter norms for green bond third-party reviewers

By
  Sebi on Friday said it has proposed to tighten the norms to appoint independent third-party reviewers or certifiers for green debt securities to align them with requirements for other ESG-linked bonds.In a draft circular, Sebi said that the current norms for green bonds, introduced in February 2023, lack detailed requirements around reviewer independence, conflict of interest mitigation, and disclosure standards that are now in place for other ESG-linked securities under a June 2025 circular.The regulator's latest proposal seeks public comments on a revised framework that would bring parity by incorporating comprehensive criteria for third-party certifiers of green bonds on non-convertible securities.Under the proposed norms, issuers of green debt securities will need to appoint reviewers who are independent of their management, directors, and key managerial personnel. These reviewers will be remunerated in a way that prevents any conflicts of interest and possess relevant expert...
Post a Comment
Read more