Currency Product Note 3

8/8/2019 Currency Product Note 3

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ESEARCH DESK - Religare Commodities Limited Address: A2 A-3,A-4,plot No.11, 5th Floor, Park Centra ,Sector-125,Noida ,U.P-201301-mail: [email protected]:www.religarecommodities.com | REL/RCL/CRD/TM/19/00

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Product Note February, 2010

OVERVIEW

Foreign exchange rates, like any other asset class move depending on various factors, like demand-supply, intere

rate parity, trade and capital flow, speculators taking positions, clients hedging risk arising from their trade and

capital flow etc. Introduction of currency futures will complete the suite of instruments available for trading and

hedging to the Indian resident through exchange platform.

CURRENCY FUTURE TRADING

The currency futures trading will be of interest to those who wish to :-

Invest

Hedge

Arbitrage

Speculate

WHO IS ELIGIBLE TO TRADE

Individuals

Corporate

Firms

Others

HOW DO THE CLIENT STARTS TRADING

Currency futures can be bought and sold through RSL currency future trading platform. Client will have to op

a trading account with RSL and complete the following registration formalities

CLIENT REGISTRATION FORMALITIES

The client desirous of trading in currency futures through RSL would be required to submit following documents :

Know your client form (KYC) along with necessary required documents

Member Constituent Agreement

Risk Disclosure document


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Trading Monday To Friday

Trading Hours 9:00 AM to 5:00 PM

Price Quotation In INR

Tenor of Contract Maximum of 12 Months

Available Contracts Monthly

Settlement Mechanism In INR

Settlement Reference Rate RBI Reference Rate

Last Trading Date Two working days prior to Final Settlement Date

Final Settlement Date Last working day of month, except Saturday.

Settlement

Daily settlement : T + 1

Final settlement : T + 2

CONTRACT SPECIFICATIONS


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USD-INR

Symbol USD-INR

Contract Size USD 1000

Tick size 0.25 Paisa or INR 0.0025

Quantity Freeze Above 10,000

Price Range

+/-3 %(Tenure upto 6 months )

+/- 5% (Tenure greater than 6 months)

Client position limit Higher of 6% of total open interest or USD 10 million

Calendar spreads

Minimum Rs. 400/- per contract for one month of spread and Rs. 500

for Two month Spread and Rs.800/- for three months spread

Initial Margin Minimum 1.75 % on First day and 1% thereafter

Extreme

Loss Margin 1 %


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EUR-INR

Symbol EUR - INR

Contract Size EURO 1000



Price Range



Client position limit Higher of 6% of total open interest or EURO 5 million

Calendar spreads

Minimum Rs. 700/- per contract for one month of spread, Rs. 1000 for

Two month Spread and Rs.1500/- for three months spread or more


Extreme

Loss Margin 0.3 %


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GBP-INR

Symbol GBP - INR

Contract Size Pound Sterling 1000



Price Range



Client position limit Higher of 6% of total open interest or GBP 5 million

Calendar spreads




Extreme

Loss Margin 0.5 %


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JPY-INR

Symbol JPY - INR

Contract Size Japanese Yen 100000



Price Range



Client position limit Higher of 6% of total open interest or YEN 200 million

Calendar spreads



Initial Margin Minimum 4.50 % on First day and 2.30% thereafter

Extreme

Loss Margin 0.7%


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TRADING PARAMETERS

Following trading parameters and order attributes are specified for the Currency Derivatives

segment:

DAILY SETTLEMENT PRICE

Daily settlement price for futures contracts shall be the closing price of such contracts on the trading

day. The closing price for a futures contract shall be calculated on the basis of the last half an hour

weighted average price of such contract or such other price as may be decided by the relevant

authority from time to time.

Theoretical daily settlement price for unexpired futures contracts which are not traded during the

last half an hour on a day

Theoretical daily settlement price for unexpired futures contracts, which are not traded during the

last half an hour on a day, shall be the price computed as per the formula defined by NSCCL.

Final Settlement Price for mark to market settlement of futures contracts

Final settlement price for a futures contract shall be the Reserve Bank Reference Rate on the last

trading day of such futures contract, or as may be specified by the relevant authority from time to

time.

Calendar Spread Margins

A currency futures position in one expiry month which is hedged by an offsetting position in a

different expiry month would be treated as a calendar spread.


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Futures Final Settlement Margin

Futures Final Settlement Margin shall be levied at the clearing member level in respect of the final settlement

amount due. The final settlement margins shall be levied from the last trading day of the contract till thecompletion of pay-in towards the Final Settlement.

Extreme Loss margins

Clearing members shall be subject to extreme loss margins in addition to initial margins. The applicable

extreme loss margin shall be 1% on the mark to market value of the gross open positions or as may be

specified by the relevant authority from time to time.

In case of calendar spread positions, extreme loss margin shall be levied on one third of the mark to market

value of the open position of the far month contract.

Extreme Loss margin requirement shall be computed as under:

1. For client positions - shall be netted at the level of individual client and grossed across all clients, at

the trading/ clearing member level, without any set-offs between clients.

2. For proprietary positions - shall be netted at trading/ clearing member level without any set-offs

between client and proprietary positions.

The margins so computed shall be aggregated first at the trading member level and then aggregated at the

clearing member level.


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Dollar/INR Trading:

View Trade on USD/INR View Trade on USD/INR

Bullish on USD Buy USD/INR Bearish on USD Sell USD/INR

Bullish on INR Sell USD/INR Bearish on INR Buy USD/INR

Lets take an example, suppose that USD/INR March contract is trading at Rs. 50.9550, one has a

bullish view on USD or bearish view on INR. He enters the market to buy 10 lots of USD/INRMarch

future.

Trading USD/INR

Entry Price Rs. 50.9550

Lot Size 1000 USD

No. of Lots 10

Assuming that USD/INR closes at 51.0550, current position is shown in the table given below

Trading USD/INR


Closing Price Rs. 51.0550

Lot Size 1000 USD

No. of Lots 10

MTM Profit Rs. 1000 (on 10 lots)


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Movement of 10 paise or INR 0.10 in favour of the trade; gave a profit of Rs. 1000 on 10 lots. If only

1 lot was traded, movement of 10 paise will affect the net position by Rs 100.

Similarly if someone has opposite view i.e. bearish view on USD or bullish view on INR. He will enter

market to sell USD/INR and lets say,sell 10 lots of USD/INR March futureat Rs. 50.9550.

Trading USD/INR


Lot Size 1000 USD

No. of Lots 10

Assuming that USD/INR closes at Rs. 51.0550, current position is shown in the table given below

Trading USD/INR



Lot Size 1000 USD

No. of Lots 10

MTM Loss Rs. 1000


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If someone wants to trade in GBP/INR bearish view on GBP or bullish view on INR. He will enter

market to sell GBP/INR and lets say,sell 10 lots of GBP/INR February futureat Rs. 74.

Trading GBP/INR

Entry Price Rs. 74

Lot Size 1000 GBP

No. of Lots 10

Assuming that GBP/INR closes at 74.10, current position is shown in the table given below

Trading GBP/INR

Entry Price Rs. 74


Lot Size 1000 GBP

No. of Lots 10

MTM Loss 1000


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If someone wants to trade in EUR/INR bearish view on EUR or bullish view on INR. He will enter

market to sell EUR/INR and lets say,sell 10 lots of EUR/INR February futureat Rs. 64.

Trading EUR/INR

Entry Price Rs. 64

Lot Size 1000 Euro

No. of Lots 10

Assuming that EUR/INR closes at 64.10, current position is shown in the table given below

Trading EUR/INR

Entry Price Rs. 64


Lot Size 1000 Euro

No. of Lots 10

MTM Loss 1000


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If someone wants to trade in JPY/INR bearish view on JPY or bullish view on INR. He will enter

market to sell JPY/INR and lets say,sell 10 lots of JPY/INR February futureat Rs. 52.

Trading JPY/INR

Entry Price Rs. 52

Lot Size 100000 Yen

No. of Lots 10

Assuming thatJPY/INR closes at 52.20, current position is shown in the table given below

Trading JPY/INR

Entry Price Rs. 52


Lot Size 100000 Yen

No. of Lots 10

MTM Loss 2000


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Payoff profile for Futures Trading

Long at 51.60

5 1 . 1

5 1 . 2

5 1 . 3

5 1 . 4

5 1 . 5

5 1 . 6

5 1 . 7

5 1 . 8

long at 51.60

P

rice

s

Short at 51.60

51.1

51.2

51.3

51.4

51.5

51.6

51.7

51.8

Sh ort at 51.60

Contracts

P

rices


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ESEARCH DESK - Religare Commodities Limited Address: A2 A-3,A-4,plot No.11, 5th Floor, Park Centra ,Sector-125,Noida ,U.P-201301-mail: currency@religare inWebsite: www religarecommodities com | REL/RCL/CRD/TM/19/00

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Currency Product Note 3

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