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Foreign Exchange

India: Futures get off to modest start in India

India moved a step closer to liberalizing its foreign exchange market with the launch of rupee currency futures trading on the National Stock Exchange on August 29. Initial activity was brisk, with about 70,000 contracts changing hands in the first session. The NSE contracts are extremely small by international standards – they have a notional value of just $1,000 – and would appear to be very much aimed at attracting retail participation. Perhaps not surprisingly, early trading was dominated by banks and large corporations.

According to the NSE, the first trade was transacted by East India Securities, although presumably there was also someone on the other side of the deal. The largest trade was by Standard Chartered Bank and was for 15,000 contracts, worth a nominal $15 million. The NSE says that so far about 300 trading members, including 11 banks, have registered in its new currency segment.

Tight controls

Although the launch of the futures onshore does mark a big step in liberalization, relatively tight controls remain in place. Initially, only rupee futures against the dollar have been allowed to be listed, and these can only extend out as far as one year in maturity.