CPAI seeks clarification on RBI’s new rule wef April 5
The RBI in a Jan 5 circular said the recognised stock exchanges may offer forex derivative contracts involving rupee to users for the purpose of hedging contracted exposure
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New Delhi: The Commodity Participants Association of India (CPAI) on Wednesday sought timely clarification and Frequently Asked Questions (FAQs) document from the stock exchanges on the RBI’s new rule for rupee derivatives that will come into effect on April 5.
The Reserve Bank of India (RBI) in a January 5 circular said the recognised stock exchanges may offer forex derivative contracts involving rupee to users “for the purpose of hedging contracted exposure”. In 2008, the RBI had allowed transactions in rupee/dollar currency futures to “hedge an exposure to foreign exchange rate risk or otherwise.”
CPAI, in a statement, said the new rule has confused brokers and sought clarification with respect to para 3.4a of the new rule for rupee derivatives. Para 3.4a states that the stock exchanges will inform clients that while they are not required to provide proof of underlying exposure for positions of up to $100 million, the clients have to ensure such exposures exist and that they have not already been hedged.
The association has sought clarification from the RBI as well as stock market exchanges on whether clients are required to have underlying exposure to take position in the currency futures. If they are required to have underlying exposure, then do the clients need to square off the position before April 5 when the new rule will come into effect, it asked.
