RBI issues guidelines for trading in currency future

The Reserve Bank of India (RBI), the master bank and Security and Exchange Board of India (SEBI), the stock market regulator on Wednesday have issued the detail guidelines for exchange-traded currency futures. Now banks will need RBI nod to participate in forex futures.

Releasing its guidelines - Currency Futures (Reserve Bank) Directions, 2008- that has come into effect immediately on August 06, RBI said: “Currency futures are permitted in US Dollar - Indian Rupee or any other currency pairs, as may be approved by the Reserve Bank from time to time.”

Only Indian are permitted to trade forex future- 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- as per RBI guidelines say and the size of each contract should be $1000, which settlement and quote will be translated in to Indian currency – Rupee.

The maximum limit for maturity limit of the contract would be 12 months and settlement price will be as per RBI reference rate on the last trading day, said RBI in the issued guidelines.

The forex future trade would be held only foremost recognised stock market- Bombay Stock Exchange (BSE), National Stock Exchange (NSE) and Multi Commodity Exchange (MCX).

SEBI in this regard has released the detail guidelines for getting eligibility. The trading members, clearing members will have to need SEBI’s prior approval and product design should be as per RBI’s released report on May 29, said SEBI.

Banks that qualify the eligibility criteria will get permission from RBI and SEBI and can trade currency future. RBI has set the eligibility for the banks in this regard. According to it, the qualified banks must be authorised by RBI, must have minimum net worth of Rs.500-crores, minimum CRAR of 10 per cent, net NPA should not exceed 3 per cent and must have earn net profit for last 3 years.

RBI has also stated that there should be separate membership of recognised stock exchange for currency future trading from equity derivatives segment or the cash segment.