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Capital market regulator Sebi today raised the transaction limit in exchange traded currency derivatives to $15 million, from $10 million previously, for both foreign and domestic investors without having any underlying exposure.
Foreign Portfolio Investors (FPIs) and domestic clients can take position (long and short) in foreign currency up to $15 million or equivalent per exchange without having to establish existence of any underlying exposure, Sebi said in a circular.
It further said that taking positions beyond $15 million in any exchange will require an underlying exposure.
Requirement of an underlying exposure has been placed to check speculation in the currency market.
Currently, domestic and foreign investors are allowed to take a long (bought) as well as short (sold) position up to $10 million per exchange.
To take positions in excess of $15 million, FPIs and domestic investors would be "required to have an underlying exposure in Indian debt or equity securities, including units of equity or debt mutual funds."
These investors can also take positions in GBP-INR, JPY-INR, and EUR-INR pairs of up to $5 million per exchange.
These limits would be monitored by the exchanges and breaches, if any, may be reported.
The exchanges can prescribe fixed limits for the contracts in currencies other than USD such that these limits are within the equivalent of $5 million.
