Trading by banks in currency derivative to be as per RBI norms

Tags: News
Market regulator Sebi today said any trading activity of banks in the currency derivative space will be guided by Reserve Bank of India (RBI) guidelines.

The Securities and Exchange Board of India (Sebi), in a circular, said that "banks, whether participating in the currency derivatives segment as clients or as stock brokers, shall be guided" by the provisions of RBI.

Besides, the regulator said that domestic institutional investors can take position in foreign currency up to USD 100 million or equivalent per exchange in the currency derivative segment.

"Gross open position across all contracts shall not exceed 15 per cent of the total open interest or USD 100 million, whichever is higher," Sebi said.

However, Sebi said that this position limit is subject to domestic institutional investors being permitted by their respective sectoral regulators to participate in the currency derivatives segment.

Last month, Sebi had allowed foreign portfolio investors (FPI) to participate in the domestic exchange traded currency derivatives in order to enhance the depth of the foreign exchange market.

The central bank had in July last year imposed curbs such as doubling of margin requirement and a ceiling on position limits on exchange-traded currency derivatives.

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