Sebi Allows Cross-Currency Futures in Multiple Pairs

New Delhi: The Securities and Exchange Board of India (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-US dollar, pound sterling-dollar and dollar-Japanese yen (JPY).

On the exchange-traded option contracts front, euro-rupee (INR), pound-rupee and Japanese yen-rupee have been added to the existing dollar-rupee pair, the market regulator said in a circular.

The move follows the guidelines issued by Reserve Bank of India 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 euro-rupee, pound-rupee and Japanese yen-yen 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.