To curb rupee fall, regulators toughen FX derivatives rules

MUMBAI (Reuters) - 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.

In a separate order, the Securities and Exchange Board of India (SEBI) increased the margin requirement on the domestic dollar-rupee forward trade to 100 percent of the traded amount, which means investors will have to shore up the full amount of the transaction at the time of the trade itself and not during settlement.

SEBI also imposed fresh restrictions on open interest on USD-INR trades.

"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)