Sebi paves way for rupee derivatives trade in IFSC, sets position limit for investors

Paving the way for trading in rupee-linked currency futures and options at international financial services centres (IFSCs), markets regulator Sebi on Monday fixed position limit of up to USD 1 billion for brokers, institutional investors and eligible foreign investors.

The move will benefit Indian bourses at IFSCs by bringing rupee trading to the country, as such derivative contracts are presently dominated by exchanges in Dubai and Singapore.

The decision comes after the Reserve Bank of India (RBI) in October allowed rupee derivatives with settlement in foreign currency to be traded at IFSCs.

Under the framework, Sebi in a circular said trading members, institutional investors and eligible foreign investors can now trade on currency futures and options contracts involving the Indian rupee and take positions of USD 1 billion or 15 per cent of the total open interest, whichever is higher.

Other clients can take open position across all contracts of USD 100 million or 6 per cent of the total open interest, whichever is higher.

All eligible foreign investors can now open account directly with trading members at exchanges in IFSC and they do not need any PAN number as part of the KYC guidelines laid down by Sebi.

"Stock exchanges shall impose appropriate penalties for violation of position limits by eligible market participants," the Securities and Exchange Board of India (Sebi) said.

This comes after Finance Minister Nirmala Sitharaman in her Budget Speech said that in recent years, there has been a surge in trading volumes of the Indian rupee in the offshore financial centres.

"The government and RBI has taken various measures to permit rupee derivatives to be traded in the International Financial Services Centre at GIFT city, Gujarat," she added.

In a separate statement, India International Exchange MD and CEO V Balasubramaniam said, "We welcome the Sebi move to allow IFSC Exchanges to launch the currency futures and options contracts involving Indian rupee within one working day of this announcement being made by Finance Minister in her Budget speech."