SEBI to revoke curbs on dollar-rupee derivative trading

The Securities and Exchange Board of India (SEBI) on Monday revoked certain restrictions it had imposed on dollar-rupee derivative trading in July last year following the local currency rupee stabilizing over the recent months.

In a circular issued on Monday, the market regulator SEBI said it has decided to "restore the margins for dollar-rupee contracts to pre-July 8, 2013 rates" and this decision would be effective April 15, 2014.  

 

It may be noted that on July 9, 2013, SEBI in consultation with banking regulator RBI, had doubled the initial margins and extreme loss margins for dollar-rupee contracts.

 

These steps were taken in the backdrop of extreme volatility in rupee valuation against the US dollar, which had seen the Indian currency soar to near Rs 70 levels against the greenback. 

 

The regulator had also imposed restrictions on total open interest on USD-INR trades, while the central bank had banned banks from proprietary trading in domestic currency futures and the exchange-traded options market.

 

With normalcy coming back to the rupee-dollar trade and the Indian currency now trading near Rs 60 levels, these restrictions are being eased now and the margin requirements are being halved from the current level to bring them back to their original levels. 

Accordingly, the stock exchanges are being directed to take necessary steps to put in place systems for implementation of the circular, including necessary amendments to the relevant byelaws, rules and regulations; if any. 

 

Further, the regulator instructed the stock exchanges to implement provisions of this circular with effect from April 15, 2014 and also bring the provisions of this circular to the notice of the trading members/clearing members and also disseminate the same on its website. 

 

G-secs maturity periods

 

Sebi also restricted foreign investors from buying government securities having maturity of less than one year, a move that aims at encouraging inflows of long-term overseas fund.

 

"FIIs (Foreign Institutional Investors)/QFIs (Qualified Foreign Investors) shall henceforth be permitted to invest only in dated government securities having residual maturity of one year or above," Sebi said in a circular on Monday.