BSE to launch cross-currency derivatives next week

Leading stock exchange BSE on Wednesday said it will launch cross-currency derivatives and cross INR options next week, a move that will help increase liquidity in the market.

The announcement comes after the exchange received markets regulator Sebi's approval for introducing cross currency derivatives (future and options) on pairs such as Euro (EUR)-US Dollar (USD), Pound Sterling (GBP)-USD and USD-Japanese Yen (JPY).

It has also obtained permission to introduce option on EUR-INR, GBP-INR and JPY-INR, in addition to existing USD-INR options.

Additionally, the regulator has also allowed trading in cross-currency derivatives contracts for a longer period between 9:00 AM and 7:30 PM.

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"BSE will launch cross-currency derivatives and cross INR options with effect from February 27, 2018," the exchange said in a statement.

Currently, futures contracts are available only for currency pairs that have the rupee as one leg and an options contract for only a single currency pair—dollar or rupee—is available.

For futures contracts in cross-currencies, 12 standardised monthly contracts will be made available to investors and the contracts will be settled in cash (rupees).

In options contracts, three serial monthly contracts followed by three quarterly contracts will be launched.

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"The introduction of new products will allow entities like corporates, foreign portfolio investors and non-resident Indians to participate and to take positions in the exchange traded currency derivatives markets. Besides, a longer trading session will enable market participants to capture key global events in pricing which they otherwise lose out," BSE Managing Director and Chief Executive Ashishkumar Chauhan said.

The move will help companies to hedge their forex exposure and increase liquidity in the markets.

"The last trading day for the contracts shall be two working days prior to the last working day of the expiry month at 12:30 pm and the final settlement price of the cross-currency derivatives contracts shall be computed using the RBI reference rate for USD-INR and the corresponding exchange rate published by RBI for EUR-INR, GBP-INR and JPY-INR, as applicable, on the last trading day of the contract," BSE said.