In order to deepen the market, the Reserve Bank today issued guidelines permitting standalone Primary Dealers (PDs) to participate in exchange-traded currency futures on approved stock exchanges.
The participation is "subject to adherence to certain risk control measures and without diluting their existing obligations in the G-sec market", the RBI said in a press release.
The move is expected to diversify the participation profile in the currency futures market and further deepen it, the apex bank said.
The central bank had announced the move in the fourth bi-monthly policy review on September 29, 2015. The guidelines announced today will be effective from April 11, 2016.
In the guidelines, RBI said exposure to currency futures will be treated as a non-core activity for PDs and only those with a minimum net owned fund of Rs 250 crore will be allowed to participate in currency futures.
PDs are permitted to take part in the currency futures market either as clients or direct trading/clearing members of the currency derivatives segment of the stock exchanges recognised by Sebi, the release said.
They can trade only on their own account and are not permitted to take positions on behalf of clients, it said.
They will be permitted to take long and short positions in the currency futures market with or without having an underlying exposure subject to the position limits specified by the exchanges, it said.
