Wednesday, February 11, 2009

Currency futures to clock $1 bn/day in '09: MCX-SX

India’s trading volume in currency futures is expected to cross the $1-billion (Rs 4,800 crore) mark in the current year, a top industry official said.

“I would expect 2009 should see us through the $1-billion volume (per day) in currency futures,” MCX-SX’s Chief Executive Officer (CEO) U Venkataraman said on the sidelines of a Banking and Financial Services Industry (BFSI) summit here on Tuesday.

The average combined daily trading volume in currency futures on NSE, MCX-SX and BSE is estimated at around Rs 2,000 crore.

“I would reckon the $1-billion volume per day could be an ideal thing that the market can boast of,” Venkataraman said.

“On Tuesday, we have scaled up to $800 million. Big corporate houses are still not looking at currency futures. Every business exposed to foreign exchange risk needs to have a facility to hedge against such risk,” he said.

Globally, the average volume of currency futures was around $80 billion, but it was much less compared to the $3.2-trillion spot market trades every day, Venkataraman said, adding that futures trading was close to 4-4.5 per cent of the OTC market.

In the first phase of operations, only the dollar-rupee pair is traded in the currency futures market.

Asked on launching of other currency futures, Venkataraman said, “We will be looking at introducing other currency pairs as and when allowed by regulatory authorities like the Reserve Bank of India (RBI) and the Securities and Exchange Board of India (Sebi)… We expect further reforms to come in.”

Globalisation, integration of markets and progressive increase of cross-border flow of capital have transformed the dynamics of Indian financial markets. This has increased the need for dynamic currency risk management.

The steady rise in India’s foreign trade along with liberalisation in the foreign exchange regime has led to a large inflow of foreign currency into the system in the form of FDI and FII investments.

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