Options on USD-INR Spot Rate
Circular No. DNPD/5/2010, dated 30-7-2010
1. This is in continuation of SEBI Circular No. SEBI/DNPD/Cir- 38 /200 dated August 06, 2008 regarding Exchange Traded Currency Derivatives.
2. It has now been decided to permit introduction of options on USD-INR spot rate on currency derivatives segment of Stock Exchanges. Eligible Stock Exchanges may do so after obtaining prior approval from SEBI.
3. The details in terms of product design and risk management framework for options on USD-INR spot rate are as given under Annexure I.
4. The position limits specified vide SEBI Circular No. SEBI/DNPD/Cir-38/2008 dated August 6, 2008 and SEBI circular No. SEBI/DNPD/Cir-45/2009 dated March 24, 2009 now stand modified and the revised position limits are as given under Annexure II.
5. This circular is issued in exercise of the powers conferred under Section 11 (1) of the Securities and Exchange Board of India Act 1992, read with Section 10 of the Securities Contracts (Regulation) Act, 1956 to protect the interests of investors in securities and to promote the development of, and to regulate the securities market.
6. The circular shall come into force from the date of the circular.
7. This circular is available on SEBI website at www.sebi.gov.in., under the category “Derivatives- Circulars”.
Guidelines on trading of Currency Options on Recognised Stock/New Exchanges
A.P (DIR Series) Circular No. 05, dated 30-7-2010
Attention of Authorised Dealers Category – I (AD Category – I) banks is invited to the Foreign Exchange Management (Foreign Exchange Derivative Contracts) Regulations, 2000 dated May 3, 2000 [Notification No. FEMA/25/RB-2000 dated May 3, 2000], as amended from time to time and A.P. (DIR Series) Circular No. 05 dated August 6, 2008 in terms of which persons resident in India were permitted to participate in the currency futures market in India subject to directions contained in the Currency Futures (Reserve Bank) Directions, 2008.
2. In order to expand the existing menu of exchange traded hedging tools, it was announced in the Monetary Policy Statement 2010-11 (para 62) that recognised stock exchanges would be permitted to introduce plain vanilla currency options on spot US Dollar/ Rupee exchange rate for residents. Accordingly, it has been decided to permit trading of currency options on spot USD-INR rate in the currency derivatives segment of the stock exchanges, recognized by the Securities and Exchange Board of India (SEBI). The currency options market would function subject to the directions, guidelines, instructions, rules, etc issued by the Reserve Bank and the SEBI from time to time.
3. Persons resident in India are permitted to participate in the currency options market, subject to the directions contained in the Exchange Traded Currency Options (Reserve Bank) Directions, 2010, [Notification No. FED.01 / ED 2 (HRK)-2010 dated July 30, 2010] (Directions) issued by the Reserve Bank of India, a copy of which is annexed (Annex-I).
4. Necessary amendments to Foreign Exchange Management (Foreign Exchange Derivatives Contracts) Regulations, 2000 (Notification No. FEMA.25/RB-2000 dated May 3, 2000) (Regulations) have been notified in the Official Gazette vide G.S.R. No. 635(E) dated July 27, 2010, a copy of which is annexed (Annex-II).
5. The above Directions have been issued under Section 45W of the Reserve Bank of India Act, 1934 and the above Regulations have been issued under clause (h) of sub-Section (2) of Section 47 of the Foreign Exchange Management Act, 1999 (42 of 1999).
6. This circular has been issued under Sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and is without prejudice to permissions / approvals, if any, required under any other law.