Reserve Bank of India (RBI)

Primary dealers or bond houses should have a minimum capital base of Rs 250 crore to participate in the exchange traded currency futures market, the Reserve Bank of India said in a notification issued on Thursday. The move is expected to add some liquidity in the moribund futures market.

“Exposure to currency futures will be treated as a non- core activity for PDs….,” the central bank said. “As prescribed in the existing guidelines on capital adequacy standards, the capital charge for market risk for the non-core activities (including currency futures) which are expected to consume capital should not be more than 20 per cent of the NOF as per last audited balance sheet.”

Net owned fund is the sum total of paid up capital, reserves & surplus along with a few other components. Four pair of currencies can be traded including dollar-rupee, euro-rupee, pound-rupee, yen-rupee.

PDs are permitted to participate in the currency futures market either as clients or direct trading/clearing members of the currency derivatives segment of the stock exchanges recognized by the capital market regulator.

PDs can trade only on their own account and they are not permitted to take positions on behalf of clients, RBI said.

RBI has restricted position limits for PDs’ participation in the market as they are permitted to take long and short positions in the currency futures market with or without having an underlying exposure subject to the position limits specified by the exchanges.


 

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