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Currency derivatives turnover on bourses drops 23% in FY14

Total turnover in currency derivatives trading of three domestic bourses dropped nearly 23% to Rs 67.36 lakh crore in the last fiscal, a period that saw capital market regulator Sebi tightening exposure limits in the segment.

Total currency derivatives turnover on three stock exchanges — NSE, MCX-SX and USE — stood at Rs 87.10 lakh crore in 2012-13, as per the Securities and Exchange Board of India’s (Sebi) report.

The volume of currency derivatives trading on the bourses also plunged about 30% to Rs 110.62 crore in the last fiscal. In 2012-13, the same was at Rs 158 crore.

Leading bourse BSE began trading in currency derivatives in late November last year. The latest data related to turnover on this exchange was not part of the Sebi report.

According to official data, NSE and MCX-SX saw a sharp decline in turnover during the last financial year. However, USE’s turnover in the segment rose sharply during the period.

On NSE, currency derivatives turnover declined 24% to Rs 40.12 lakh crore in the last fiscal, from Rs 52.74 lakh crore in 2012-13. This is the first decline in the segment’s turnover for NSE in a financial year since 2008-09.

The number of currency derivatives contracts on NSE declined to 66 crore from 96 crore in the period under review.

MCX-SX recorded a currency derivative turnover of Rs 24.22 lakh crore in 2013-14 as against Rs 33 lakh crore in the preceding financial year. Its volumes also plunged to about Rs 40 crore from Rs 59.7 crore in the year-ago period.

On the other hand, USE’s currency derivatives turnover jumped to Rs 3 lakh crore in FY14, from Rs 1.33 lakh crore in FY13. The number of contracts also doubled to 4.74 crore.

In July 2013, Sebi had tightened the exposure limits for currency derivatives to check large scale speculations in the capital market and help government stem fall in rupee value. Following the move, the turnover in currency derivatives segment had mostly witnessed a decline.

As per Sebi directives in July last year, the exposure to all currency contracts for a broker had been capped at 15% of their overall exposure or $ 50 million, whichever is lower. It had also doubled the initial margins and extreme loss margins for dollar-rupee contracts.

With the Indian currency stabilising in recent times, Sebi, last month, eased the restrictions by halving the margin requirements imposed on dollar-rupee derivative trading.

Currency derivative contracts allow investors to take position on change in the foreign exchange rates between pairs of two currencies, such as rupee and dollar.


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