Regulators toughen rules on FX derivatives to curb rupee fall

MUMBAI (Reuters) - India's regulators toughened rules for derivatives trading in the currency market in a bid to arrest the steep decline of the rupee, which fell to a record low against the dollar on Monday.

The Reserve Bank of India, in a notification issued late on Monday, banned banks from proprietary trading in domestic currency futures and the exchange-traded options market. (For the RBI notification, click http://link.reuters.com/syb59t)

In a separate order, SEBI doubled the margin requirement on the domestic dollar-rupee forward trade, which means investors will now have to pay twice as much in margins for a transaction at the time of the trade itself.

SEBI also imposed fresh restrictions on open interest on USD-INR trades. (For the SEBI circular, click http://link.reuters.com/pab59t)

"In consultation with RBI and in view of the recent turbulent phase of extreme volatility in USD-INR exchange rate, it has been decided to curtail position limits and increase margin requirements for Currency Derivatives," the SEBI circular said.

(Reporting by Himank Sharma in Mumbai; Editing by Prateek Chatterjee)