MCX Stock Exchange (MCX-SX) on recently said it has received approvals from market watchdog SEBI (Securities and Exchange Board of India) and banking regulator RBI ( Reserve Bank of India) to launch Currency Options.
Currency Derivatives Segment..!
These approvals will enable the exchange to expand its offerings in the Currency Derivatives Segment (CDS) by introducing currency options in the Dollar-Indian Rupee (USDINR) currency pair.
MCX-SX said it held a successful mock trading session on August 4, 2012 and will soon announce the date of live trading of currency options.
Mr. Joseph Massey, MD and CEO, MCX-SX. “Options have the comparative advantage of maintaining a certain degree of flexibility in hedging. Introduction of this product completes the spectrum of hedging instruments available on the MCX-SX currency segment and adds further efficiency to risk mitigation mechanism in USD-INR”
Currency options are contracts that grant the buyer of the option the right. But not the obligation, to buy or sell the underlying currency at a specified exchange rate during a specified period.
For this right, the buyer pays premium to the seller of the option. Currency futures contracts in US Dollar-Indian Rupee, Euro-Indian Rupee, Japanese Yen-Indian Rupee & British Pound-Indian Rupee pairs are already traded on MCX-SX.
MCX-SX, whose application for a full-fledged stock exchange was recently approved by SEBI, currently offers trading in only currency futures. It has witnessed a steady and significant growth in currency futures turnover and open interest and continued to maintain its leadership in currency futures with a market share of about 43 per cent in the last fiscal, 2011-12. The average daily turnover has increased to Rs. 13,530.47 crore (July 2012) from Rs. 324.78 crore in its first month of operation.
The exchange is used by SMEs, treasury of large corporates (importers and exporters), banks, institutions and individuals involved in forex transactions.
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