Select Language
 
-
-   -
 
Skip Navigation LinksMCX-SX > Products > Currency Derivatives

Currency Derivatives

Futures Contract is a standardized exchange traded contract to buy or sell a certain underlying instrument at a certain date in the future at a specified price. The underlying instrument in Currency future is a foreign exchange rate. The price of a future contract is expressed in terms of INR per unit of other currency e.g. US Dollars. Currency future contracts allow investors to hedge against foreign exchange risk. Currently Currency Futures are available on four currency pairs viz. US Dollars (USD-INR), Euro (EUR-INR), Great Britain Pound (GBP-INR) and Japanese Yen (JPY-INR).

Current Market Reports

   
About Currency Derivatives

MCX-SX Exchange launched its currency futures trading platform on October 07, 2008. Currency futures on USD-INR were introduced for trading and subsequently the Indian rupee was allowed to trade against other currencies such as euro, pound sterling and the Japanese yen.

 
Products Specification

Currency Derivatives segment of MCX-SX provides trading in derivative instruments like Currency Futures on four currency pairs, Currency and each of these currency contracts on MCX-SX has a life of 12 months from the month in which it is launched

 
Options Contract Specification

Options Contract Specification

Contract Specifications for USD - INR (Futures)

Symbol USDINR
Instrument Type FUTCUR
Unit of trading 1 (1 unit denotes 1000 USD)
Underlying USD
Quotation/Price Quote Rs. per USD
Tick size 0.25 paise or INR 0.0025
Trading hours Monday to Friday
9:00 a.m. to 5:00 p.m.
Contract trading cycle 12 month trading cycle.
Last trading day Two working days prior to the last business day of the expiry month at 12:15pm.
Final settlement day Last working day (excluding Saturdays) of the expiry month.
The last working day will be the same as that for Interbank Settlements in Mumbai.
Base price Theoretical price on the 1st day of the contract. On all other days, DSP of the contract.
Price operating range
Tenure upto 6 months Tenure greater than 6 months
+/-3 % of base price +/- 5% of base price
Position limits
Clients Trading Members Banks
Higher of 6% of total open interest or USD 10 million Higher of 15% of the total open interest or USD 50 million Higher of 15% of the total open interest or USD 100 million
Minimum initial margin 1.75% on first day & 1% thereafter.
Extreme loss margin 1% of MTM value of gross open position.
Calendar spreads Rs. 400/- for a spread of 1 month, Rs. 500/- for a spread of 2 months, Rs. 800/- for a spread of 3 months & Rs. 1000/- for a spread of 4 months or more
Settlement Daily settlement : T + 1
Final settlement : T + 2
Mode of settlement Cash settled in Indian Rupees
Daily settlement price (DSP) DSP shall be calculated on the basis of the last half an hour weighted average price of such contract or such other price as may be decided by the relevant authority from time to time.
Final settlement price (FSP) RBI reference rate
 
Hedging scenarios
Exchange-traded currency futures are used to hedge against the risk of rate volatilities in the foreign exchange markets. Here, we give two examples to illustrate the concept and mechanism of hedging:
Example 1:
Suppose an edible oil importer wants to import edible oil worth USD 100,000 and places his import order on July 15, 2008, with the delivery date being 4 months ahead. At the time when the contract is placed, in the spot market, one USD was worth say INR 44.50. But, suppose the Indian Rupee depreciates to INR 44.75 per USD when the payment is due in October 2008, the value of the payment for the importer goes up to INR 4,475,000 rather than INR 4,450,000. The hedging strategy for the importer, thus, would be:
Current Spot Rate (15th July '08)
Buy 100 USD - INR Oct '08 Contracts on 15th July '08
: 44.5000
(1000 * 44.5500) * 100 (Assuming the Oct '08 contract is trading at 44.5500 on 15th July, '08)
Sell 100 USD - INR Oct '08 Contracts in Oct '08 Profit/Loss (futures market) : 44.7500
1000 * (44.75 – 44.55) * 100 = 20,000
Purchases in spot market @ 44.75 Total cost of hedged transaction : 44.75 * 100,000
100,000 * 44.75 – 20,000 = INR 4,455,000
 
Example 2:
A jeweller who is exporting gold jewellery worth USD 50,000, wants protection against possible Indian Rupee appreciation in Dec ’08, i.e. when he receives his payment. He wants to lock-in the exchange rate for the above transaction. His strategy would be:
One USD - INR contract size : USD 1,000
Sell 50 USD - INR Dec '08 Contracts
(on 15th Jul '08)
: 44.6500
Buy 50 USD - INR Dec '08 Contracts in Dec '08 : 44.3500
Sell USD 50,000 in spot market @ 44.35 in Dec '08 (Assume that initially Indian rupee depreciated , but later appreciated to 44.35 per USD as foreseen by the exporter by end of Dec '08)
Profit/Loss from futures (Dec '08 contract) : 50 * 1000 *(44.65 – 44.35)
= 0.30 *50 * 1000
= INR 15,000
 
The net receipt in INR for the hedged transaction would be: 50,000 *44.35 + 15,000 = 2,217,500 + 15,000 = 2,232,500. Had he not participated in futures market, he would have got only INR 2,217,500. Thus, he kept his sales unexposed to foreign exchange rate risk.

Futures Contract Specification

Contract Specifications for USD - INR (Options)

Symbol USDINR
Instrument Type OPTCUR
Unit of trading/ Market Lot 1 (1 unit denotes 1000 USD)
Underlying US Dollar – Indian Rupee (USD-INR) spot rate
Type of Option Premium styled European Call and Put Options
Quotation/Price Quote Premium quoted in INR
Tick size 0.10 paise or INR 0.0010
Strike Price Twelve in-the-money, Twelve out-of the-money and One near-the-money strikes would be provided for all available contracts for both call and put options (25 CE and 25 PE)
Strike Price Interval INR 0.2500
Trading hours Monday to Friday
9:00 a.m. to 5:00 p.m.
Contract trading cycle Three serial monthly contracts followed by one quarterly contract of the cycle March/June/September/December
Expiry/ Last trading day Two working days prior to the last working day of the expiry month at 12:15pm.
Exercise at Expiry All in-the-money open long contracts shall be automatically exercised at the Final Settlement Price (FSP) and assigned on a random basis to the open short positions of the same strike and series
Final settlement day Last working day (excluding Saturdays) of the expiry month.
Final Settlement price RBI Reference Rate on the date of expiry of the contract. The last working day will be the same as that for Interbank Settlements in Mumbai.
Position limits The gross open position across all contracts (both futures and options) shall not exceed the following:
Clients Trading Members Banks
Higher of 6% of total open interest or USD 10 million Higher of 15% of the total open interest or USD 50 million Lower of 15% of the total open interest or USD 100 million
Initial margin SPAN based Margin
Extreme loss margin 1.5% of the Notional Value of the open short option position. Notional Value for this purpose shall be calculated on the basis of the latest available Reserve Bank Reference Rate for USD-INR
Calendar spreads The margin for options calendar spread would be the same as specified for USD-INR currency futures calendar spread.
The margin would be calculated on the basis of delta of the portfolio in each month. A portfolio consisting of a near month option with a delta of 100 and a far month option with a delta of –100 would bear a spread charge equal to the spread charge for a portfolio which is long 100 near month currency futures and short 100 far month currency futures.
Net Option Value The Net Option Value is the current market value of the option times the number of options (positive for long options and negative for short options) in the portfolio. The Net Option Value would be added to the Liquid Net Worth of the clearing member. Thus, mark to market gains and losses would not be settled in cash for options positions.
Mode of settlement Cash settled in Indian Rupees
Settlement of Premium Premium to be paid by the buyer in cash on T+1 day
Final settlement T+2 day
 

How it works

  • Presently, all futures contracts on MCX-SX are cash settled. There are no physical contracts.
  • All trade on MCX-SX takes place on its nationwide electronic trading platform that can be accessed from dedicated terminals at locations of the members of the exchange.
  • All participants on the MCX-SX trading platform have to participate only through trading members of the Exchange.
    • Participants have to open a trading account and deposit stipulated cash/collaterals with the trading member.
  • MCX-SX stands in as the counterparty for each transaction; so participants need not worry about default.
    • In the event of a default, MCX-SX will step in and fulfil the obligations of the defaulting party, and then proceed to recover dues and penalties from them.
  • Those who entered either by buying (long) or selling (short) a futures contract can close their contract obligations by squaring-off their positions at any time during the life of that contract by taking opposite position in the same contract.
    • A long (buy) position holder has to short (sell) the contract to square off his/her position or vice versa.
    • Participants will be relieved of their contract obligations to the extent they square off their positions.
  • All contracts that remain open at expiry are settled in Indian rupees in cash at the reference rate specified by RBI.