The Reserve Bank of India issued guidelines for introduction of cross-currency futures and exchange traded cross-currency option contracts in multiple currency pairs.
The cross currency futures will be available in various pairs, including euro (EUR)-US dollar, pound sterling (GBP)-USD and USD- Japanese Yen (JPY), while on the exchange traded option contracts front, euro-rupee (INR), GBP-INR and JPY-INR have been added to the existing USD-INR pair.
The cross currency contracts shall enable direct hedging of exposures in foreign currencies and facilitate execution of cross-currency strategies by market participants.
Authorised dealer banks can undertake trading in all permitted exchange traded currency derivatives within their Net Open Position Limit (NOPL) subject to limits stipulated by the exchanges.
Under the new contracts, residents and foreign portfolio investors will be allowed to take positions in the cross currency contracts without having to establish underlying exposure subject to the position limits as prescribed by the exchanges.
The release of final guidelines follows an announcement to introduce cross-currency futures and exchange traded option contracts in the fourth bi-monthly monetary policy statement in September this year.
