Currency Options & Cross Currency Derivatives Trading

Currency Options Trading In India

Today SEBI came with a circular allowing currency options and cross currency derivatives contracts (Futures and Options) .  SEBI has allowed recognized stock exchanges in India to offer trading in currency options in  EUR-INR, GBP-INR and JPY-INR currency pairs.  This is in addition to existing USD-INR currency options already available for trading in exchanges in India.  This is announced on 09 March 2016 by SEBI after RBI Permission for allowing cross currency derivatives trading and options in currency pairs in India.

This is long awaited as only USD-INR is available for trading in options segment.  Many traders and exporters and importers who have transaction in Euro zone, Japan and UK are facing difficulties to hedge their positions.  Allowing currency options trading in GBP, JPY and EUR will allow people to properly hedge their future cash flows in those currencies.

Exchange Traded Cross Currency Derivatives contracts

Further SEBI has allowed Exchange traded cross currency derivative contracts on EUR-USD, GBP-USD and USD-JPY currency pairs.  Earlier cross currency pairs were not available for trading in Indian stock exchanges.  All the currency pairs available were linked to INR. Now with the introduction of these nee cross currency futures contracts MNCs with exposure to different currencies can effectively hedge trading in Indian Stock exchanges.

Cross currency contracts on currency pairs of EUR-USD, GBP-USD and USD-JPY are avaialble for both futures and options.

Existing contract limits in currency segment of  USD 15 million for USD-INR contracts & USD 5 million for non USD-INR contracts remains same.

Further stock exchanges are allowed trading in cross currency derivatives contracts from 09:00 Hrs to 19:30 Hrs.

To ensure the orderly and regulated market stock exchanges have to implement dynamic price bands in the currency F&O segment as follows

currency options dynamic price bands of currency derivatives in india

Before launching these new products of currency options and cross currency derivatives on Indian stock exchange, they must get prior approval from SEBI regarding contract specifications, management of risk etc.,

All the conditions will remain unchanged which are specified by SEBI for this segment.  Additional safeguards and conditions as required may be put in place by respective stock exchanges and concerned clearing corporations to manage risk and for ensuring orderly and proper trading in currency options and cross currency derivatives trading in exchanges.


source: SEBI circular on options in currencies and cross currency derivatives contracts


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