Currency derivatives: Sebi tweaks exposure limits for brokers

The markets regulator has also asked stock exchanges to have a uniform methodology for computing and monitoring proprietary position limits in the currency contracts.

New Delhi: Sebi on Wednesday modified open interest limits for bank and non-bank stock brokers in currency derivative contracts.

Besides, the markets regulator has asked stock exchanges to have a uniform methodology for computing and monitoring proprietary position limits in the currency contracts.

In currency derivatives parlance, open interest generally refers to positions taken by a broker that are yet to be closed.

Stock brokers -- bank as well as non-bank -- should ensure all proprietary positions created in FCY-INR pairs are within the revised consolidated limits, according to a Sebi circular.

USD-INR, EUR-INR, GBP-INR and JPY-INR are among the currency derivative pairs or FCY-INR.

With respect to bank stock brokers, the single INR limit for proprietary position will be the higher of the 15 percent total open interest across all FCY-INR pairs or up to USD 200 million, the circular said.

In the case of non-bank stock brokers, the same will be applicable except for the overall limit being capped at USD 100 million.

"Stock exchanges, in consultation with each other, shall implement a uniform methodology for computing and monitoring... Of proprietary position limits in INR," the circular said.

The rupee movement has been volatile in recent weeks amid uncertain global cues.

Stock exchanges and clearing corporations have to seek Sebi's approval for launching cross-currency derivatives products.

"Such proposal shall, inter-alia, include the details of contract specifications, risk management framework, surveillance systems, and other requirements," the circular said.