Revision of limits relating to requirement of underlying exposure for currency derivatives contracts
Summary
This SEBI circular revises the limits for underlying exposure requirements in currency derivatives contracts for Foreign Portfolio Investors and domestic clients. It modifies specific paragraphs of a previous 2014 circular to align with updated Reserve Bank of India guidelines on position limits. Stock exchanges and clearing corporations are directed to implement these changes and report any breaches to the RBI.
Text
Foreign Portfolio Investors (FPIs) may take long as well as short positions per stock exchange upto the following limit without having to establish the existence of any underlying exposure: (i) USD-INR currency pair: USD 15 million; (ii) EUR-INR, GBP-INR and JPY-INR currency pairs (all put together): USD 5 million.
FPIs shall ensure that their short positions at a stock exchange across all contracts in USD-INR pair do not exceed USD 15 million and do not exceed USD 5 million in EUR-INR, GBP-INR and JPY-INR pairs, all put together.
In the event a FPI breaches the short position limit, stock exchanges shall restrict the FPI from increasing its existing short positions or creating new short positions in the currency pair till such time FPI complies with the said requirement.
To take long positions in excess of USD 15 million in USD-INR pair and in excess of USD 5 million in EUR-INR, GBP-INR and JPY-INR pairs, all put together, FPIs shall be required to have an underlying exposure in Indian debt or equity securities, including units of equity/debt mutual funds.
Domestic clients may take long as well as short positions per stock exchange upto the following limit without having to establish the existence of any underlying exposure: (i) USD-INR currency pair: USD 15 million; (ii) EUR-INR, GBP-INR and JPY-INR currency pairs (all put together): USD 5 million.
Domestic clients may take positions in excess of USD 15 million in USD-INR pair and in excess of USD 5 million in EUR-INR, GBP-INR and JPY-INR pairs, all put together, subject to the conditions specified in the RBI A.P. (DIR Series) Circular no. 147 dated June 20, 2014 and RBI A.P. (DIR Series) Circular no. 90 dated March 31, 2015.
Stock exchanges, under intimation to SEBI, may prescribe fixed limits for EUR-INR, GBP-INR and JPY-INR currency pairs within the equivalent of USD 5 million.
The limits mentioned above at para 3.1 and para 3.2 shall be monitored by stock exchanges and/or clearing corporations and breaches, if any, shall be reported to the Market Surveillance Team of Financial Markets Regulation Department (FMRD), RBI.
take necessary steps to put in place systems for implementation of the circular, including necessary amendments to the relevant bye-laws, rules and regulations;
bring the provisions of this circular to the notice of the stock brokers / clearing members and also disseminate the same on their website;
communicate to SEBI the status of implementation of the provisions of this circular.
Source: SecMarx — Revision of limits relating to requirement of underlying exposure for currency derivatives contracts. Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.