NSE chosen as platform for launch of currency futures
On Friday National Stock Exchange or NSE launched highly anticipated currency futures. NSE based in Mumbai presents the derivatives, as finance minister P. Chidambaram kicked off primary exchange-traded currency futures of the country. National Stock Exchange is also the first platform for currency futures, chose by authorities.
The same is to be soon followed by India’s other exchange organization like Bombay Stock Exchange and Multi Commodity Exchange. These exchange offices are expected to receive consent from regulatory authorities. The day witnessed huge trading by banks, big companies as well as Forex dealers. The front-month deals witnessed heavy trading and utmost activity.
Around 1:15 in the afternoon, NSE also witnessed trade of over 28,942 contracts and the heaviest trade being the contracts of September and October.
While on Thursday rupee closed at 43.78/79, Friday saw rupee being traded at 43.78/79 per dollar, lowest at 43.8325 and highest at 43.69. The contracts traded are of size of US$1,000, which is smaller than 100,000 Australian dollar and 12.5mn Japanese yen (Chicago Mercantile Exchange’s contract sizes)
P. Chidambaram, Finance minister, felt the need of use of more refined financial tools by government. He said that launch of currency futures is followed by the need of reinforcement of corporate bond markets and rejuvenation of exchange-traded interest rate derivatives bazaar. He also added that government is following the above requirements with priority.
The launch of currency features is expected to assist investors finding it difficult to cope with untamed and abrupt rise and fall in the Indian currency. In a time frame of last one month, rupee has traded 17 month low and decade high.
Chief Executive Officer NSE, Ravi Narain, said that in economic market there has been a realization of exchange rate equally affecting individual’s financial life, just as interest rate. He also added that in spite of the start being a slow one there is probability of the amount to touch US$35bn.
Purpose of currency futures is to allow investors put of foreign exchange risk experienced by them. For now, dealing in all derivatives is limited to pair of dollar-rupee only.