Sebi ups currency exposure limits

The Securities and Exchange Board of India’s (Sebi) move to double the open position limit in exchange-traded currency derivatives may enthuse more small and mid-corporates to participate in trading of these instruments. However, it may fail to encourage banks to enhance their turnovers in this segment.

Sebi has increased the gross open position of clients (banks) across all contracts up to 6 per cent of the total open interest or $10 million, whichever is higher. At present, there is a limit of 6 per cent of the total open interest or $5 million.

For non-bank trading members, the limits have been enhanced to 15 per cent of the total open interest or $50 million, whichever is higher, from 15 per cent or $25 million, earlier.

“It is a very good step as the demand for this was there in the market for long. This could be the first step by the regulator to encourage companies to enter currency derivatives trading,” said Reliance Money chief executive officer, Sudip Bandyopadhyay.

According to U Venkatraman, chief executive officer, MultiCommodity Exchange (MCX) there has been an increase in the number of importers and exporters in the small- and medium-enterprise level who have been approaching them for participating in currency derivatives market.

At present, there are 531 Sebi-registered entities who can participate in currency and foreign exchange derivatives trading. Among them, 17 banks are registered with MCX. The combined turnover of currency derivatives trading at NSE and MCX stood at over Rs 7,000 crore today.

However, industry experts felt that banks may be reluctant to increase their participation in currency derivatives trading despite today’s move.