India – SEBI Currency Derivative Limit

India – SEBI Currency Derivative Limit

On 15 March, SEBI revised exposure limit on currency derivatives.

  • RBI revised the limits, beyond which market participants would be required to
    establish underlying exposure in the currency derivatives segment.

Revisions

  • Allow domestic clients/ FPIs may take long or short positions without underlying.
  • Up to a single limit of $100m equivalent, across all currency pairs involving INR.
  • FPIs on short positions at all stock exchanges, contracts in FCY-INR under $100m.
  • In the event a FPI breaches the short position limit, stock exchanges shall restrict
    the FPI from increasing its existing short positions or creating new short positions.
  • When take long position in excess of $100m in all contracts in FCY-INR pairs, FPIs
    it will be required to have underlying exposure in Indian debt or equity securities.
  • Domestic clients may take positions in excess of $100m in in all contracts in FCY-
    INR pairs, subject to the conditions as were specified in the previous RBI circular.

Effectiveness

  • Limits shall be monitored by stock exchanges/clearing corporations and breaches,
    reported to market surveillance team of Financial Markets Regulation Department.