Introduction of Exchange Traded Cross Currency Derivatives contracts on EUR USD GBP USD and USD JPY currency pairs and Exchange Traded Option contracts on EUR-INR, GBP-INR and JPY-INR currency pairs
Summary
SEBI permits recognized stock exchanges to introduce exchange-traded cross-currency futures and options on EUR-USD, GBP-USD, and USD-JPY pairs. The circular also allows currency option contracts on EUR-INR, GBP-INR, and JPY-INR pairs, subject to specific product designs and risk management frameworks. Eligible market participants are allowed to trade these instruments within prescribed position limits and trading hours. This section defines the last trading day, final settlement day, and cash settlement mechanism for cross-currency derivatives. It establishes daily and final settlement prices based on volume-weighted averages and RBI reference rates. Additionally, it outlines position limits for various market participants and detailed risk management requirements including margin calculations. This section details the margin requirements for currency options, including specific calendar spread charges and assignment margins. It outlines the product design framework for EUR-INR, GBP-INR, and JPY-INR spot rate options, covering trading hours, contract sizes, and settlement mechanisms. Additionally, it defines risk management parameters such as initial margin calculations based on wo
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it has been decided to permit recognized stock exchanges to introduce cross-currency futures and options contracts on EUR-USD, GBP-USD and USD-JPY.
it has also been decided to permit recognized stock exchanges to introduce currency options on EUR-INR, GBP-INR and JPY-INR currency pairs.
Eligible market participants, i.e., stock brokers, domestic institutional investors, FPIs and clients, are allowed to take positions in the exchange traded cross-currency futures and option contracts... subject to terms and conditions mentioned in this circular and the aforesaid circular of RBI.
The existing limits of USD 15 million for USD-INR contracts and USD 5 million for non USD-INR contracts... shall remain unchanged.
Eligible market participants shall also ensure that any synthetic positions... created using USD-INR, EUR-INR, GBP-INR or JPY-INR exchange traded currency derivatives contracts... is within the position limits prescribed...
Stock exchanges shall impose appropriate penalties for violation of position limits by eligible market participants.
allow trading in cross-currency derivatives contracts between 09:00 a.m. and 07:30 p.m.
The clearing corporation of the stock exchange shall undertake two additional updates of the SPAN risk management parameters during the extended trading hours.
stock exchanges shall implement a mechanism of Dynamic Price Bands in the currency derivatives segment... so as to prevent acceptance of orders placed beyond the price limits set by the stock exchanges
Stock exchanges shall set the daily dynamic price bands of the currency futures contracts as mentioned in the table below: Contracts with tenure up to 6 months ± 3%... greater than 6 months ± 5%
Before the launch of the cross-currency derivatives product(s)... the stock exchange / clearing corporation shall submit proposal to SEBI for approval giving the details of contract specifications, risk management framework, surveillance systems...
Stock exchanges / Clearing corporations may specify additional safeguards / conditions, as deemed fit and under intimation to SEBI, to manage risk and to ensure orderly trading.
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Source: SecMarx — Introduction of Exchange Traded Cross Currency Derivatives contracts on EUR USD GBP USD and USD JPY currency pairs and Exchange Traded Option contracts on EUR-INR, GBP-INR and JPY-INR currency pairs. Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.