Sebi sets position limit for rupee derivatives trade at IFSC

Markets regulator Sebi on Monday fixed position limit for market participants trading on exchanges at international financial services centres (IFSCs) for currency futures and options contracts involving the Indian rupee.

This comes after the Reserve Bank of India (RBI) in October allowed rupee derivatives with settlement in foreign currency to be traded at IFSCs, a move aimed at deepening the local bourses by bringing rupee trading home.

For trading members, foreign as well as institutional investors, Sebi in a circular said gross open position across all contracts should not exceed 15 per cent of the total open interest or USD 1 billion equivalent, whichever is higher.

The limit is also applicable for trading members' positions on a proprietary basis as well as clients' position.

For other clients, the regulator said gross open position across all contracts will be 6 per cent of the total open interest or USD 100 million equivalent, whichever is higher.

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

V Balasubramaniam, MD and CEO at India International Exchange (INX), said the move is a significant boost for IFSC and will offer an opportunity to decelerate rupee trading abroad with price discovery through exchanges at IFSCs.

According to Sebi, the institutional investors include international banking units, insurance companies, asset management companies and other funds set up in IFSC, foreign banks set up in other offshore jurisdictions, foreign portfolio investors, supranational, multilateral and statutory institutions.