07-09-2012, 12:24 PM
CURRENCY FUTURES TRADING IN INDIA
ABSTRACT
Currency futures are new forex risk management instrument. It is one of the better tool to hedge the foreign risk for the companies who have an exposure to foreign exchange either because of export or import. As these days Indian export as well as import are booming with huge volume so it is risky for the companies to keep an huge open positions, which can result into huge losses so forex futures is a better hedging tool where one can book the profit even before the receivables has arrived. While the process for introduction of contracts in other currencies such as rupee-euro, or rupee-yen may soon be available, the government wants the product basket to be akin to the OTC markets. Indian financial sector regulators are set to launch currency options shortly. Introduction of options will be good development as it will lead to diversification. Futures with non-dollar currencies can minimize the risk also. The extension of working hours will also helpful in increasing the volume of currency futures trading. All residents Indians are allowed to participate in currency futures, but this is expected to change once the local market has reached a maturity level than NRIs and FIIs will also participate in currency futures in India. It is feasible to shift trading to other currencies to exchange platform as volumes have grown apparently. Greater trade and financial flows from Euro Zone and Japan can make standardized contracts possible.