The Reserve Bank of India (RBI) deferred implementing its new rules on exchange-traded rupee derivatives by almost a month, saying that the central bank’s policy on this issue has remained unchanged over the years.
- Currency Derivatives are exchange-traded contracts deriving their value from their underlying asset, i.e., the currency.
- The investor buys or sells specific units of fixed currency on a pre-specified date and rate. These contracts are actively traded on the stock exchanges and are mainly used by importers and exporters to hedge against domestic currency fluctuation.
- Currency derivative contracts are standardised through a foreign regulatory exchange with an intermediary clearing house.
- Since derivatives are traded in a regulated market, the contract does not leave a window for buying or selling current assets at a specific date and rate, expelling the chance of counterparty risk.
- Exchange-traded currency derivatives are jointly regulated by RBI and Securities and Exchange Board of India (Sebi).
- Apart from the currency derivatives segment, exchanges offer equities cash and derivatives, interest rate derivatives and commodity derivatives.
