Trading Currency Derivative

NSE Trading Basics for Currency Derivative

Content

Introduction to currency derivative in NSEAvailable CurrencyTrading SpecificationCurrency Future Contact SpecificationOption Contacts SpecificationFundamental of Currency Movement

2 mymoneygurukul.com

Introduction to Currency Derivative

NSE started currency future trading on 29th August, 2008

NSE started currency option trading on 29th October, 2010

Any one can trade currency futures and options by opening an account under a broker or trading member

Currency future contracts are available on four international currency- Dollar, Pound, Euro and Yen

mymoneygurukul.com3

Available Currency and Trading Specification

Currency future contracts are available for 12 months trading cycle

Currency future contracts are available for trade on all days of the week except Saturday, Sunday and holidays declared by NSE in advance

Currency trading time: 9.00 AM to 5.00 PM IST

Screen based automated trading system are available for currency future trading

Internet trading is also available in NSE

mymoneygurukul.com4

Trading Specification

Quotation: The currency future contracts are quoted in Rupee term, like INR 55.63/$1

Tenor of contracts: Currency future contracts have maximum maturity of12 months

Available Contracts: All monthly maturities from one month to 12 months are available

Settlement: The currency future contracts are settled in cash

in INR Currency future contracts are steeled on last

working day of near month contract

mymoneygurukul.com5

Trading Specification

Trading of near month future contracts are closed two days prior to settlement day and a new far month contract is introduced

The settlement price is Reserve Bank of India reference rate on the last trading day

Settlement Example:Contract : FUTCURUSDINR31-AUG-2012 (USD-INR Future contract ended on August 2012) Settlement Day: 31st August (last trading day of

August 2012) Last Trading Day: 29th August (two days prior to last working

day) Settlement Price: Reference price of RBI as on 29th August

mymoneygurukul.com6

Currency future Contract Specification US Dollar

Symbol: USDINR Unit of Trading: 1 unit= $1000 Tick Size: 0.25 paise or INR 0.0025 Quantity Freeze: 10,001 or greater Price operating range

• Tenure upto 6 months: +/- 3% of base price• Tenure greater than 6 months: +/- 5% of base price.

Initial Margin: Span based margin (MTM margin and extra margin is required as per broker and exchange norm)

Settlement: T+1 for daily settlement and T+2 for final settlement (as discussed is previous slide)

Daily settlement price: Calculated on the basis of the last half an hour weighted average price.

Mode of settlement: Cash settled in Indian Rupees

mymoneygurukul.com7

Currency future Contract Specification EURO

Symbol: EURINR Unit of Trading: 1 unit=1000 Euro Tick Size: 0.25 paise or INR 0.0025 Quantity Freeze: 10,001 or greater Price operating range

• Tenure upto 6 months: +/- 3% of base price• Tenure greater than 6 months: +/- 5% of base price.

Initial Margin: Span based margin (MTM margin and extra margin is required as per broker and exchange norm)

Settlement: T+1 for daily settlement and T+2 for final settlement (as discussed is previous slide)

Daily settlement price: Calculated on the basis of the last half an hour weighted average price.

Mode of settlement: Cash settled in Indian Rupees

mymoneygurukul.com8

Currency future Contract Specification POUND

Symbol: GBPINR Unit of Trading: 1 unit=1000 GBP Tick Size: 0.25 paise or INR 0.0025 Quantity Freeze: 10,001 or greater Price operating range

• Tenure upto 6 months: +/- 3% of base price• Tenure greater than 6 months: +/- 5% of base price.

Initial Margin: Span based margin (MTM margin and extra margin is required as per broker and exchange norm)

Settlement: T+1 for daily settlement and T+2 for final settlement (as discussed is previous slide)

Daily settlement price: Calculated on the basis of the last half an hour weighted average price.

Mode of settlement: Cash settled in Indian Rupees

mymoneygurukul.com9

Currency future Contract Specification JAPANESE YEN

Symbol: JPYINR Unit of Trading: 1 unit=1000 YEN Tick Size: 0.25 paise or INR 0.0025 Quantity Freeze: 10,001 or greater Price operating range

• Tenure upto 6 months: +/- 3% of base price• Tenure greater than 6 months: +/- 5% of base price.

Initial Margin: Span based margin (MTM margin and extra margin is required as per broker and exchange norm)

Settlement: T+1 for daily settlement and T+2 for final settlement (as discussed is previous slide)

Daily settlement price: Calculated on the basis of the last half an hour weighted average price.

Mode of settlement: Cash settled in Indian Rupees

mymoneygurukul.com10

Option Contract Specification

For all currency symbol (Symbol, Tick size, quantity freeze and unit size are same as future) Option type: Premium style European Call & Put

Options Contract trading cycle: 3 serial monthly contracts

followed by 1 quarterly contracts of the cycle March/June/September/December

Strike price: 12 In-the-money, 12 Out-of-the-money and 1 Near-the-money. (25 CE and 25 PE)

Strike price intervals: INR 0.25 Settlement procedure is same as future contract

mymoneygurukul.com11

Fundamental factors behind Currency

Inflation trend and government policy regarding inflation

Balance of Payment PositionPrevailing interest rate in domestic and

foreign countryTrends in Export and ImportTrends of FDI and FII flow Industry capacity utilizationUnemployment rateRBI policy on Forex etc.

mymoneygurukul.com12

More Reading

Read about Forex market in mymoneygurukul.com http://mymoneygurukul.com/article-category/

forex-market/Read about other investment and personal

finance mater http://mymoneygurukul.com/

Next Presentation How to make profit in Forex market : Trading tools

and Analysis

mymoneygurukul.com13

Give Your Feedback and Follow us

Email: info@mymoneygurukul.comTwitter: @mymoneygurukulFace book: mymoneygurukul LinkedIn: mymoneygurukulSlideshare: mymoneygurukul

mymoneygurukul.com14