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Reserve Bank of India (RBI) Panel's recommendations on currency futures
Friday, November 16, 2007

The RBI panel proposes the introduction of trading in currency futures to facilitate market partakers to better manage the applicable risks in currency.

The Reserves Bank's in-house working group has recommended setting up of committed exchanges for currency futures to make sure that regulatory and supervisory control rests exclusively with the central bank.

The division suggested that once the mechanisms were in place, only two categories of entities outside India - foreign institutional investors (FIIs) and non-resident Indians (NRIs) - could be permitted in the market only as hedgers through nominated banks.

The bank also advocated the obligation of suitable position limits on FIIs and NRIs. In the preliminary stage the group has suggested that a single contract should have a notional value of $1,000 and currency futures maturing in the first 12 calendar months could be offered fundamentally to support proper price discovery and retail involvement.

The ownership of the exchanges must be well diversified and the shareholders and directors must meet the "fit and proper" criteria. Foreign direct investment (FDI) should not surpass the limits prescribed for financial infrastructure companies, as in the case of stock exchanges. Furthermore, no person would be permitted to hold more than 5 per cent



 

 

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