currency futures market in india


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currency futures market in india

  1. 1. CURRENCY FUTURES MARKET IN INDIA At INDIA INFO LINE LTD, HYDERABAD By Sudhansu sekhar patro Roll no-12m106 Dhruva College Of Management
  2. 2. Agenda • • • • • • • • • • • Derivatives Introduction to currency derivatives Foreign exchange market History of currency futures Currency futures market Contract specification in currency derivatives Factors effecting the exchange rate Clearing and settlement Trading strategies in currency future Growth of the currency futures Conclusion
  3. 3. EXECUTIVE SUMMARY • Risk is the inherent component involved in all financial activities. Everybody tries to reduce the risk as to the extent of possible with a view to enabling entities to manage the volatility in the currency market. Currency futures are contracts to buy or sell one currency (only dollar-rupees as of now) against another at a specified price and date in the futures. • The main objectives of the study is understand the currency futures market, Growth of the currency future market and different strategic are using in currency futures. This topic I decided to do this project under the guidance of my internal guide and external guide at India Info line Ltd. • The study is mainly from secondary sources of data which include the NSE website and website of the company. There are no primary sources available in this branch. • India has a strong presence in the world’s economic activities so a strong need felt by RBI and SEBI to do something in this area. Hence a working committee has been formed and according to their suggestions trading in currency futures started in India. • India info line is a good company which is listed on the NSE and BSE.. The company gives more profit to the investors. And also gives true advice to investors. So that more people are interested to invest their money in this company.
  4. 4. Company profile • • • • • India info line ltd was originally incorporated on October 18, 1995 as Probity Research and service Private Limited in Mumbai under the companies Act, 1956. We became a public limited company on April 28,2000 and the name of the company was changed to Probity Research and service Limited .The name of the company was changed to India on May 23, 2000 and later to India Info line Limited on march 23, 2001. The company is part of India Info line Group. It has pan- India presence through its distribution network of 607 branches, 151 franchises located in 346 cities. The company also has a presence in Dubai, New York and Singapore. India Info line provides a gamut of financial products and services. The company offers booking services in the Cash and Derivatives segments of the NSE and BSE. IIFL (Asia) Pte- This subsidiary is engaged in carrying out financial sector activities in other Asian markets.
  5. 5. Products of India info line ltd
  6. 6. Objectives • To understand the currency futures market in India • To understand the clearing , settlement of currency futures • To study the strategy of the currency futures market so that client will benefit. • To understand the growth of the currency futures
  7. 7. Derivatives • Securitas under the Securitas contract Act,1956 and hence the trading of derivatives is governed by the regulatory framework . • A product whose value is derived from the underlying asset. • Underlying asset can be equity, commodity or other asset. • Has a future settlement date
  8. 8. Introduction to the currency derivatives • • • • A Currency market is a market in which one Currency is traded for another. The Spot exchange rate refers to the prevailing exchange rate at which a Currency can be bought or sold for another. The Forward exchange rate refers to the exchange rate for the future delivery of the underlying Currencies. A Currency Futures contract, traded on Exchanges, is a standardised version of a Forward contract. The only difference between a Forward contract and the Futures contract is that the Forward contract is an over-the-counter (OTC) product. The main advantages of Currency Futures over Forwards are price transparency, elimination of counter-party credit risk and greater accessibility for all. The Futures contract is an agreement to buy or sell the underlying Currency, on a specified date in the future, and at a specified price. The underlying asset for a Currency Futures contract is a Currency. The Exchange’s clearing house acts as a central counter-party for all trades and thus provides a performance guarantee. Currency Futures can be bought and sold on the Currency Exchanges through members of the Exchange. MCX-SX, NSE, BSE and USE all offer Currency Futures in India. Before trading, the investor/trader/speculator needs to open a trading account and deposit the stipulated cash and/or collaterals with the trading member. The average daily turnover in global Forex and related markets is trillions of US Dollars.
  9. 9. Foreign exchange market • The foreign exchange market or forex market as it is often called is the market in which currencies are traded. Currency Trading is the world’s largest market consisting of almost trillion in daily volume and as investors learn more and become more interested, the market continues to rapidly grow. • Forex market the largest market in the world. • There is no central marketplace for the exchange of currency, but instead the trading is conducted over-the-counter. Unlike the stock market, this decentralization of the market allows traders to choose from a number of different dealers to make trades with and allows for comparison of prices.. • The spot currency market is open twenty-four hours a day, five days a week, with currencies being traded around the world .
  10. 10. History of currency futures • First currency futures –Chicago Mercantile Exchange (CME) IN 1972. • International Monetary market (IMM) lunched trading in several currency futures on may 16,1972
  11. 11. Currency futures in India • Currency futures trading was started in Mumbai August 29, 2008 • With over 300 trading member including 11 banks registered in the segments , with nearly 70,000 contracts being traded. • The first trade on the NSE was by East India Securities Ltd. • Amongst the banks, HDFC Bank carried out the first trade. was by Standard Chartered Bank constituting 15,000 contracts. Bank contributed 40 percent of the total gross volume. • Traded in NSE,BSE and MCX exchange
  12. 12. Contracts specification in currency derivatives
  13. 13. Factors effecting the exchange rate fundamental Technical Political
  14. 14. Clearing House • Each exchange has a clearing house • National securities clearing corporation limited (NSCCL) undertakes clearing and settlement of all trades executed on the currency derivatives segments of the NSE. • In clearing house there are 3 member • 1. Trading member • 2. Trading-cum-clearing member • 3. Professional clearing member • It also acts as legal counterparty to all trades on the currency derivatives segment.
  15. 15. Modes of settlement in currency futures • • • • settlement means actual pay in or pay out to settle the contract. Currency futures contracts have two types of settlement MTM settlement: T+1 Final settlement : T+2
  16. 16. Trading strategic in currency futures
  17. 17. Growth of currency futures
  18. 18. conclusion The currency futures give standardized contract to its investors and individuals who are aware forex market or predict the movement of exchange rate so they will get the right platform for trading in currency futures Because of exchange traded futures contracts and its standardized nature gives the counterparty risk minimized. Initially only NSE had permission but now BSE and MCX has also started the currency futures. Mainly currency futures are using hedging purpose to minimize the risk. And there are two strategy also used in the currency futures market one is hedging and speculation . Actually currency futures not only used by businessman, exporter, importer but also individual who are interested having knowledge about forex market then can also invest in currency futures .