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 and Options a must-have for all investors’ portfolio are advantages like small margin requirements, lower entry barriers and multiplicity of options.
For Individuals & Corporates
Investors can benefit from the price difference in two ways – 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
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 & Currencies can be used for all the 4 segments & on a single platform. No separate investment is required for currency trading or cross currency trading.
- 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
- Convenience of Cash Settlement
- No-Insider Trading
- On-call & Online trading facility
- No requirement for underlying position if you are trader
- Low Margins, Low Bid‐ask Spreads
- Anonymous order matching facility
- Robust settlement systems with counter party guarantee 6 Months contract can be traded at a time, each contract is a monthly contract
To demonstrate how a move of one tick affects the price, imagine a trader buys a contract (USD 1000 being the value of each contract) at Rs. 52.2500. One tick move on this contract will translate to Rs. 52.2525 depending on the direction of market movement.
- Purchase price: Rs. 52.2500
- Price increases by one tick: + Rs. 00.0025
- New price: Rs. 52.2525
- Purchase price: Rs. 52.2500
- Price decreases by one tick: Rs. 00.0025
- New price: Rs. 52.2475
- The value of one tick on each contract is Rupees 2.50. So if a trader buys 5 contracts and the price moves up by 4 ticks, she makes Rupees 50.
- Step 1: 52.2600 – 52.2500
- Step 2: 4 ticks * 5 contracts = 20 points
- Step 3: 20 points * Rs. 2.5 per tick = Rs. 50
(Note: please note the above examples do not include transaction fees and any other fees, which are essential for calculating final profit and loss)
Specifications of Currency Futures
|Symbol||USD INR||EUR INR||GBP INR||JPY INR|
|Unit of Trading||1000USD||1000EURO||1000Pound||1,00,000YEN|
|Tick Size||0.25paise or INR 0.0025|
|Trading Hours||Monday to Friday 9.00a.m to 5:00 p.m|
|Contract trading cycle||12 month Trading Cycle|
|Expiry||Two working days prior to the last business day of the expiry month at 12:30 noon|
|Final settlement day||Last working day of the expiry month. Same as that for Interbank|
|Initial Margin||SPAN Based Margin (About 2% of Traded Value)|
|Extreme loss margin||1% of MTM value of gross open position||0.3% of MTM value of gross open position||0.5% of MTM value of gross open position||0.7% of MTM value of gross open position|
4M & More = Rs.1000
|1M = Rs.700
2M = Rs.1000
3M & More=Rs.1500
3M & More= Rs.2000
|1M = Rs.600
2M = Rs.1000
3M & More=Rs.1000
|Settlement||Daily Settlement : T+1 & Final settlement : T+2|
|Mode of settlement||Cash settled in Indian Rupees|
|Daily Settlement Price||Last half an hour weighted average price|
|Final settlement Price||RBI reference rate||RBI reference rate||RBI reference rate||RBI reference rate|
Specifications of Currency Options
|Option Type||Premium style European Call & Put Options|
|Premium||Premium quoted in INR|
|Unit of trading||1 contract unit denotes USD 1000|
|Underlying/Order Quotation||The exchange rate in Indian Rupees for US Dollars|
|Tick Size||0.25 paise i.e.INR 0.0025|
|Trading Hours||Monday to Friday 9:00a.m to 5:00p.m|
|Contract trading cycle||3 serial monthly contracts followed by 1 quarterly contracts of the cycle March/June/September/December|
|Strike Price||12 In-the-money, 12 Out-of-the money and 1Near-the-money (25CE and 25PE)|
|Strike Price Intervals||INR 0.25|
|Quantity freeze||10,001 or greater|
|Expiry/Last trading day||Two working days prior to the last business day of the expiry month at 12.30 noon|
|Exercise at expiry||All-in-the money open long contracts shall be automatically exercised at the Final settlement price and assigned on a random basis to the open short positions of the same strike and series|
|Final Settlement day||Last working day (excluding Saturdays) of the expiry month. The last working day will be the same as that for Interbank Settlements in Mumbai|
Investment in Currency Vs. Nifty Futures
Following comparison shows the Return on Investment (ROI) from
|Contract Size||USD 1000||75 Nifty|
|Trade||Buy 1 contract||Buy 1 Contract|
|Notional Value (INR)||67,000 (1,000*67.00)||7,87,500(10,500*75)|
|Margin||2,010 (67,000*3%)||78,750 (7,87,500*10%)|
|Price variation(+1.00%)||67.67 (+0.67)||10,605 (+105)|
|Notional gain/loss (INR)||670 [(67.67-67.00)*1000]||7,875[(10605-10500)*75]|
Currency Trading FAQs
What is Currency Trading?
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 its 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. Settlement for the customer is, however, 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. Settlement for the customer is, however, done in Rupee terms and not in the foreign currency.
What are the salient Features of Currency Trading?
- Exchange Traded
- 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?
Safe compared to Share trading
It provides transparent prices.
You can Trade USD/EURO/GBP and JPY against INR
Standardized, exchange traded and guaranteed by the clearing corporation.
You can take 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 price difference on various exchanges
Hedgers – Who want to hedge Export / Imports or Foreign exchange Loans
How do I trade in ETCD market?
Clients need to put a margin for taking a position and in order to trade in ETCD market.
What is margin?
One need to have a specific amount deposited into margin account to buy currency in trading account, it can be in the form of cash or collateral as specified by the regulators example. Of accepted collateral are stocks, mutual funds, Bonds, and Fixed deposit.
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 factor that determines the currency prices is supply and demand.
Interest rates, inflation, international trade and political stability are the other factors that determine the market.
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 new account for trading in Currency Trading?
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.