The Dubai Gold and Commodities Exchange (DGCX) will launch Indian rupee (INR) futures on June 7. Ostensibly, this is a historic and innovative event, but will it prove successful?
The exchange itself is naturally trumpeting the new contracts. “The DGCX INR contract will for the first time in history enable individuals and companies to have the opportunity to hedge and trade their INR risk on the transparent and equal basis that an exchange provides”, says Colin Griffith, DGCX chairman. “To date, the only market available to hedge INR risk is the non-deliverable forward interbank market but that is not accessible to everyone.”
The problem the exchange faces is that the Reserve Bank of India is unwilling to see the INR trade outside of its control. And while there is a large Indian community in the Gulf, few banks with an onshore presence in India are likely to risk incurring the central bank’s wrath. Therefore, the contract’s success is likely going to depend on retail participation.