BENEFITS OF CURRENCY TRADING
For Individuals & Corporates
Take advantage of the two-way movement of markets through Currency Futures & Options using our online currency trading platform. What makes Forex trading using Futures & Options a must-have for all investors’ portfolios are advantages such as small margin requirements, lower entry barriers, and multiplicity of options.
For Individuals & Corporates
Investors can benefit from the price difference in two ways – the difference in price between different markets and between different exchanges. Furthermore, they can also benefit from arbitrage on the prices between OTC* and ETCD^ market.
Investors Residing in India
Indian residents looking to invest abroad, can use currency derivatives to hedge their offshore investments
Investing in currency trading in India is not just for residents, even as an NRI (Non-Resident Indian) you will be able to protect your portfolio from currency risk while investing in India.
Hedging for Importers & Exporters
In case of fluctuations pertaining to exchange rates, you will be able to take appropriate positions and hedge any potential losses from your exports or imports.
Hedging for Foreign Currency Loan Borrowers
Investors will be able to hedge all unexpected increases in periodic repayments of Foreign Currency Loan if there are fluctuations in the exchange rates.
OTC: Over-The-Counter Market (Off-Exchange Market)
ETCD: Exchange Traded Currency Derivatives Market
WHAT MOVES THE USD/INR EXCHANGE RATE IN THE FOREX MARKET?
|Events likely to impact USD/INR rate||General trend for demand/supply of USD||IMPACT on USD||IMPACT ON INR|
|Increase in Imports by India||Demand for USD increases as importers have to pay in USD||Appreciates||Depreciates|
|Increase in Exports by India||Supply of USD increases as exporters get paid in USD||Depreciates||Appreciates|
|RBI buying USD to absorb excess USD liquidity due to Forex inflows||Demand for USD increases||Appreciates||Depreciates|
|RBI selling USD to meet demand for the USD||Supply of USD increases||Depreciates||Appreciates|
|Negative trade balance (Total Imports are more than Exports)||Demand for USD increases||Appreciates||Depreciates|
|Positive trade balance (Total Exports are more than Imports)||Supply of USD increases||Depreciates||Appreciates|
|Rise in global Oil prices||Demand for USD rises due to costlier oil imports||Appreciates||Depreciates|
|Fall in global Oil prices||Supply of USD increases due to cheaper oil imports||Depreciates||Appreciates|
|FIIs selling their investment in Indian shares & bonds||Demand for USD increases as they take home USD after selling||Appreciates||Depreciates|
|FIIs investing in Indian shares & bonds||Supply of USD increases as they bring USD to India for investing||Depreciates||Appreciates|
|Increase in Forex remittances by NRI’s||Supply of USD increases||Depreciates||Appreciates|
WHY INVEST IN CURRENCY WITH US?
The best part about currency market trading is that you don’t need to open a new account or have different funds for this asset class. Your cash margin and collaterals across equity, F&O, mutual funds and currencies can be used for all the 4 segments and on a single platform. No separate investment is required for currency trading or cross-currency trading.
- Benefits of currency derivatives
- Standardized lot size
- Exchange-traded & transparent
- Highly liquid
- Instant transactions
- Low margin, high leverage
- Low taxation compared to equities & commodities (No STT and CTT applied)
- Interbank market
- Governance by both the SEBI and RBI
- The convenience of cash settlement
- No insider trading
- On-call & online trading facility
- No requirement for the underlying position if you are a trader
- Low margins, low bid-ask spreads
- Anonymous order matching facility
- Robust settlement systems with counterparty guarantee 6 months contract can be traded at a time, each contract is a monthly contract
CURRENCY TRADING FAQ
What is Currency Trading?
It is an agreement to buy or sell a standard quantity (one lot or its multiples; 1 Lot = USD1,000) or in (GBP,EUR. JPY vs. INR) of a specific foreign currency (FX against INR) at a specified future date (near 12 calendar month ends) through an exchange (NSE or BSE) at an agreed price. Since it is traded on exchange it’s also called as Exchange Traded Currency Derivatives.
What are the types of Exchange Traded Derivative Contracts?
The types of Exchange Traded Derivative Contracts permitted are:
- 1. Currency Futures
- A currency futures contract is a standardized form of a forward contract that is traded on an exchange. It’s an agreement to buy or sell a specified quantity of an underlying currency on a specified date at a specified price. In India, currently four currency pairs are traded (USD/INR, EURO/INR, GBP/INR, and JPY/INR) with a lot size of 1000 units of the base currency, except JPY where the lot size is 100,000. However, settlement for the customer is done in Rupee terms and not in the foreign currency.
- 2. Currency Options
- Currency Options are contracts that grant the buyer of the option the right, but not the obligation, to buy or sell underlying currency at a specified exchange rate during a specified period of time. For this right, the buyer pays premium to the seller of the option. In India, Exchange Traded Currency Options are available in USDINR, with a lot size of 1000 units of the base currency. However, settlement for the customer is done in Rupee terms and not in the foreign currency.
What are the salient features of Currency Trading?
- Counter-party risk is absent (Settlement of trades is guaranteed)
- Requirement of margins
- Marked-to-Market everyday
- Net-Settled in INR
- Advantage of Exchange Traded Currency Derivatives :
- Participation possible without underlying
- Bid-Ask spread as low as 0.0025 INR, (near month)
- Absolute price transparency – same real-time outright price available to you
- Can trade/hedge as small as $1000 without price and client discrimination
- Total accessibility – remote trading platform possible on your desktop/laptop
- Best 5 orders available in the market can be accessed/seen easily by you
Why should I invest in the Currency Market?
- Safer compared to share trading
- Transparent prices
- You can Trade USD/EURO/GBP and JPY against INR
- Standardized, exchange-traded, and guaranteed by the clearing corporation
- Benefit of arbitrage on the prices between OTC and futures market
- One may hedge the underlying exposure and protect the earnings from the volatility of the market place
Who all can trade in currency?
- Regular traders – who want to do view, based trading
- NRIs – Who invest in India and want to insulate themselves from currency risk
- Arbitrageurs – who want to take benefit of the price difference on various exchanges
- Hedgers – Who want to hedge Export / Imports or Foreign exchange Loans
- How do I trade in the ETCD market?
- Clients need to put a margin for taking a position and in order to trade in the ETCD market.
How do I trade in the ETCD market?
Clients need to put a margin for taking a position and in order to trade in the ETCD market.
What is the margin?
One needs to have a specific amount deposited into the margin account to buy currency in the trading account. It can be in the form of cash or collateral as specified by the regulator's example. Of accepted collateral are stocks, mutual funds, bonds, and fixed deposits.
Do I need to open Demat account for currency?
No. There is no need to open a separate Demat account. However, clients need to provide cash or collateral for taking a position.
Which are the exchanges used for currency trading in India?
In India, most commonly used exchanges are NSE (National stock exchange) and BSE (Bombay stock exchange.)
Does currency market have central location?
Currency trading is not done through one central location. It is actually conducted by electronic communication networks and mobile networks around the world.
How are the prices of currencies determined?
The most important factors that determine the currency prices are:
- Supply and demand
- Interest rates
- International trade
- Political stability
What is spread?
Spread is the difference between the price quoted for Immediate Sale (offer) and Immediate Purchase (BID).
I am an ACMIIL client. Do I require a new account for trading in Currencies?
No. There is no need to open a new account for trading in currency. Only an additional segment code will be assigned to you when you express your interest in ETCD.