Indian traders and exchanges are pressing regulators to ease FX derivative rules requiring proof of currency exposure. RBI and SEBI are reviewing the framework amid concerns over reduced liquidity. A potential relaxation could revive trading volumes, enhance hedging efficiency, and align India’s currency markets with global practices.
Indian traders and stock exchanges have urged regulators to review the underlying exposure requirement for trading in foreign exchange (FX) derivatives. The Reserve Bank of India (RBI) and the Securities and Exchange Board of India (SEBI) are currently in discussions to reassess these rules, according to sources.
Key Highlights
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Current Rule: Traders must demonstrate actual currency exposure to participate in exchange-traded FX derivatives.
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Industry Concern: Brokers and proprietary traders argue this requirement restricts liquidity and reduces market depth.
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Global Context: Other major markets allow speculative participation, which enhances hedging efficiency and trading volumes.
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Proposed Review: SEBI is considering easing restrictions to enable complete hedging of commodity and currency risks, especially for corporates and exporters.
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Market Impact: A relaxation could revive volumes in the FX derivatives segment, which have dropped sharply since the rule was enforced.
Analysts believe that a balanced revision could boost participation, improve liquidity, and align India’s FX markets with global standards, while still ensuring prudent risk management.
Sources: Financial Express, Mint, Motilal Oswal