Guidelines on trading of Currency Futures in Recognised Stock / New Exchanges - আৰবিআই - Reserve Bank of India
Guidelines on trading of Currency Futures in Recognised Stock / New Exchanges
RBI/2008-09/122 August 06, 2008 To Attention of Authorized Dealers Category – I (AD Category – I) banks is invited to the Foreign Exchange Management (Foreign Exchange Derivative Contracts) Regulations, 2000 dated May 3, 2000 [Notification No.FEMA/25/RB-2000 dated May 3, 2000], as amended from time to time. 2. Persons resident in India have a menu of over-the-counter (OTC) products, such as currency forwards, swaps and options for hedging their currency risk. In the context of liberalisation of the capital accounts, as also continued development of the financial markets, it is felt that wider hedging opportunities could enhance the flexibility for the residents to manage their currency risk dynamically. International experiences have also established that the exchange traded currency futures contracts facilitate efficient price discovery, enable better counterparty credit risk management, wider participation, trading of standardized product, reduce transaction costs, etc. Accordingly, as a part of further developing the derivatives market in India and adding to the existing menu of foreign exchange hedging tools available to the residents, it has been decided to introduce currency futures in recognized stock exchanges or new exchanges recognized by the Securities and Exchange Board of India (SEBI) in the country. The currency futures market would function subject to the directions, guidelines, instructions issued by the Reserve Bank and the SEBI, from time to time. 3. Persons resident in India are permitted to participate in the currency futures market in India subject to directions contained in the Currency Futures (Reserve Bank) Directions, 2008 [Notification No.FED.1/DG(SG)-2008 dated August 6, 2008] (Directions) issued by the Reserve Bank of India, a copy of which is annexed (Annex-I). 4. Necessary amendments to Foreign Exchange Management (Foreign Exchange Derivatives Contracts) Regulations, 2000 (Notification No. FEMA.25/RB-2000 dated May 3, 2000) (Regulations) have been notified in the Official Gazette vide G.S.R. No 577(E) dated August 5, 2008, a copy of which is annexed (Annex-II). 5. The above Directions have been issued under Section 45W of the Reserve Bank of India Act, 1934 and the above Regulations have been issued under clause (h) of sub-Section (2) of Section 47 of the Foreign Exchange Management Act, 1999 (42 of 1999). 6. This circular has been issued under Sections 10 (4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and is without prejudice to permissions / approvals, if any, required under any other law. Yours faithfully, (Salim Gangadharan) [A. P. (DIR Series) Circular No. 05 dated August 06, 2008] Currency Futures (Reserve Bank) Directions, 2008 The Reserve Bank of India having considered necessary in public interest and to regulate the financial system of the country to its advantage, in exercise of its powers conferred by section 45W of the Reserve Bank of India Act, 1934 and of all the powers enabling it in this behalf, hereby gives the following directions to all the persons dealing in currency futures. 1. Short title and commencement of the directions 2. Definitions 3. Permission 4. Features of currency futures 5. Participants 6. Membership a) Minimum net worth of Rs. 500 crores. The AD Category - I banks which fulfill the prudential requirements should lay down detailed guidelines with the approval of their Boards for trading and clearing of currency futures contracts and management of risks. 7. Position limits 8. Risk Management measures The trading of currency futures shall be subject to maintaining initial, extreme loss and calendar spread margins and the Clearing Corporations / Clearing Houses of the exchanges should ensure maintenance of such margins by the participants on the basis of the guidelines issued by the SEBI from time to time. 9. Surveillance and disclosures The surveillance and disclosures of transactions in the currency futures market shall be carried out in accordance with the guidelines issued by the SEBI. 10. Authorisation to Currency Futures Exchanges / Clearing Corporations Recognized stock exchanges and their respective Clearing Corporations / Clearing Houses shall not deal in or otherwise undertake the business relating to currency futures unless they hold an authorization issued by the Reserve Bank under section 10 (1) of the Foreign Exchange Management Act, 1999. 11. Powers of Reserve Bank The Reserve Bank may from time to time modify the eligibility criteria for the participants, modify participant-wise position limits, prescribe margins and / or impose specific margins for identified participants, fix or modify any other prudential limits, or take such other actions as deemed necessary in public interest, in the interest of financial stability and orderly development and maintenance of foreign exchange market in India. (Shyamala Gopinath) [A. P. (DIR Series) Circular No. 05 dated August 06, 2008] Notification No. FEMA 177 /RB-2008 dated August 01, 2008 Foreign Exchange Management (Foreign Exchange Derivative Contracts) (Amendment) Regulations, 2008 In exercise of the powers conferred by clause (h) of sub-section 2 of Section 47 of the Foreign Exchange Management Act, 1999 (42 of 1999) the Reserve Bank of India makes the following amendments in the Foreign Exchange Management (Foreign Exchange Derivative Contracts) Regulations, 2000, (Notification No. FEMA 25/RB-2000 dated May 3, 2000) namely:- 1. Short Title and Commencement: (i) These Regulations may be called the Foreign Exchange Management (Foreign Exchange Derivative Contracts) (Amendment) Regulations, 2008. (ii) They shall come in to force from the date of their publication in the Official Gazette. 2. Amendment of the Regulations In the Foreign Exchange Management (Foreign Exchange Derivative Contracts) Regulations, 2000 (Notification No. FEMA 25/RB-2000 dated May 3, 2000) (hereafter referred to as the principal regulations), (i) in regulation 2, after clause (v), the following clause shall be inserted, namely:- (ii) in regulation 3 of the principal regulations, after the words, "foreign exchange derivative contract", the words, "or currency futures" shall be inserted. (iii) after regulation 5 of the principal regulations, the following regulation shall be inserted, namely :- A person resident in India may enter into a currency futures in a stock exchange recognized under section 4 of the Securities Contract (Regulation) Act, 1956, to hedge an exposure to risk or otherwise, subject to such terms and conditions as may be set forth in the directions issued by the Reserve Bank of India from time to time." Footnote:- The principal regulations were published in the Official Gazette vide GSR No.411(E) dated May 8, 2000 in Part II, Section 3, sub-section (i) and subsequently amended vide – GSR No.756(E) dt. 28.9.2000,
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