TRADING IN CURRENCY DERIVATIVES
Currency Futures
In simple, currency futures are
- Standard contracts of a specified quantity
- To exchange one currency for another
- At a specified date in the future called settlement date
- At a price that is fixed on the purchase date.
Trading in Currency Derivatives
The increased volatility in Foreign exchange rates had made a risk management tool in currency the need of the hour. To mitigate the currency risk and with the intention to provide a liquid and transparent market, SEBI and RBI have allowed screen based trading in currency futures for the first time in India in August 2008.
The leading domestic Currency exchanges are National Stock Exchange (NSE), MCX Stock Exchange (MCX-SX) and United Stock Exchange (USE). Volumes in Currency Exchanges have consistently increased over the past two years. The combined daily average volume has increased from Rs.16,000 crs in Aug 2008 (in NSE) to 43,000 crs (NSE, MCXSX and USE ) in October 2010, showing a 3 fold increase.
Currency trading platforms helps for
- Hedging: Minimize the risk arising from high volatility in forex markets.
- Daily Trading: Take advantage of daily movements in currency rates
- Low Margin: Trade in futures with very low margins and lesser risk.
- No Transaction cost:No Transaction charges are being levied to the clients, thereby making Currency trading feasible for even small profits.
- Low Brokerage: A brokerage as low as Rs.15 allows client take advantage of the intraday market moves.
Contract descriptions
Trading in Currency Derivatives which was initially based on USD-INR, saw three other major pairs EUR-INR; GBP-INR AND JPY-INR join the race, since February 2010. Each currency pair has 12 contracts of one month duration.
Advancing in this arena, NSE and USE has launched Currency Options on 29th October, 2010.
Major participants
As it carries the pulse of international markets, currency derivatives in Indian Exchanges provides immense opportunity for market participants viz, Hedgers, Day traders & Arbitrageurs.
- Hedgers: Banks, importers, exporters and corporate who want to mitigate their forex risk arising due to high volatility in currency finds exchange traded Currency derivatives as a effective platform to minimize their risk exposure.
- Traders: Traders take advantage from the range bound movements in Derivatives market to fetch profit, by parking a margin amount which is very less in comparison to other derivative product.
- Arbitragers: Market participants often get opportunities to exploit the price differential of USD/INR between different markets. E.g. Price disparity between OTC forward markets and futures markets.
To take advantage of this growing market, we provide Currency trading platforms through our wide network of branches and also offer Internet Based Trading in Currency Futures.
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