The Reserve Bank of India allowed trading of currency options on stock exchanges, expanding the tools available for companies to hedge their currency risk, the central bank said today.
“It has been decided to permit trading of currency options on spot U.S. dollar-rupee rate in the currency derivatives segment of the stock exchanges, recognized by the Securities and Exchange Board of India,” the Reserve Bank said in a statement posted on its website. The Securities and Exchange Board of India is the markets regulator.
The size of each contract will be $1,000, the statement said. The premium should be quoted in Indian rupees and the outstanding position should be valued in dollar terms. The maturity of the contracts shouldn’t exceed 12 months and should be settled in rupees, according to the statement.
At present, currency futures are allowed in the MCX Stock Exchange Ltd. and National Stock Exchange of India Ltd. The contracts are offered in U.S. dollar, euro, pound sterling and yen against the Indian rupee.
To contact the reporter on this story: V. Ramakrishnan in Mumbai at firstname.lastname@example.org