Markets regulator Sebi on Wednesday allowed stock exchanges to introduce cross-currency futures and exchange traded cross-currency option contracts in multiple currency pairs.
New Delhi: Markets regulator Sebi on Wednesday allowed stock exchanges to introduce cross-currency futures and exchange traded cross-currency option contracts in multiple currency pairs.
The cross currency futures will be available in various pairs, including Euro (EUR)-US Dollar (USD), Pound Sterling (GBP)-USD and USD-Japanese Yen (JPY).
On the exchange traded option contracts front, Euro-Rupee (INR), GBP-INR and JPY-INR have been added to the existing USD-INR pair, Sebi said in a circular.
The move follows the guidelines issued by Reserve Bank in this regard.
Under the new contracts, stock brokers, domestic institutional investors, FPIs and clients, are allowed to take positions in the exchange traded cross-currency futures and option contracts.
Stock exchanges will impose appropriate penalties for violation of position limits by eligible market participants.
The regulator has allowed trading in cross-currency derivatives contracts between 9:00 AM and 7:30 PM. The stock exchange and its clearing corporation will have to implement suitable risk management system and infrastructure commensurate with the trading hours.
With the view to ensuring orderly trading and market integrity, stock exchanges will have to implement a mechanism of Dynamic Price Bands for these contracts.
Before the launch of the cross-currency derivatives product and currency options on EUR-INR, GBP-INR and JPY-INR currency pairs, the stock exchange will have to submit a proposal to Sebi for approval giving the details of contract specifications, risk management framework, surveillance systems and compliance.