NE BUSINESS BUREAU
AHMEDABAD, JAN 21
The RBI (Reserve Bank of India) has announced on Tuesday that it will permit the trading of rupee derivatives with settlement in foreign currency at IFSCs (international financial services centres) like Gift City.
Initially, only exchange-traded currency derivatives will be allowed – where currency futures and options contracts are listed on recognised Gift City exchanges.
Gift City exchanges can apply for product approval to SEBI (Securities and Exchange Board of India), with detailed contract specifications. Once product approval is granted, trading can commence.
Commenting on RBI’s notification on Introduction of Rupee derivatives at International Financial Services Centres (IFSC), Balasubramaniam, MD & CEO at India International Exchange (India INX) Ltd, said, “We will be keen to launch the INR USD Futures and Options contracts on our Índia INX Derivatives platform on a non-delivery basis after obtaining necessary regulatory approvals. The introduction of INR USD pair will enable India’s own IFSC to bring the offshore market onshore. Already the offshore rupee-dollar market is pretty large and our effort will be to get the international investors and non-resident investors to engage on this at the IFSC for all their needs including hedging. Also, banks in IFSC can become members of our exchange and participate in this market.”
Currently, five cross currency pairs are available for trading at Gift City: EUR-USD, GBP-USD, JPY-USD, CNY-USD, and AUD-USD, although the trading activity is minimal as the cash market is dominated by the INR-USD pair.
The RBI had announced in October that it had decided to adopt the measure, which was one of the recommendations of the Task Force on Offshore Rupee Market to boost non-resident participation in onshore foreign exchange markets.
The move is likely to help address demands concerns from overseas market participants for the availability of better hedging tools to manage risk against exposures to India stocks and bonds.
To date, they were instead trading non-deliverable forward contracts in Singapore London and other markets for hedging purposes.
