Non-Resident Indian (NRI) means a person resident outside India who is a citizen of India or is a person of Indian origin"[as per FEMA regulations]

What Are Currency Markets?

Currencies are the money of different countries, and currency trading is the buying and selling of these currencies. There are almost as many different currencies as there are countries, but the most popular currencies for trading are the US Dollar, the Euro, the British Pound (Sterling), and the Japanese Yen. The currency markets are some of the most popular day trading markets, and they therefore have some of the highest volume (number of contracts) and liquidity. This high volume and liquidity makes the currency markets attractive to all types of traders, including individual day traders, trading companies, financial and non financial companies, banks, and governments

Currency futures are futures markets where the underlying commodity is a currency exchange rate, such as the Euro to US Dollar exchange rate, or the British Pound to US Dollar exchange rate. Currency futures are essentially the same as all other futures markets (index and commodity futures markets), and are traded in exactly the same way. Futures based upon currencies are similar to the actual currency markets (often known as Forex), but there are some significant differences. For example, currency futures are traded via exchanges, such as the CME (Chicago Mercantile Exchange), but the currency markets are traded via currency brokers, and are therefore not as controlled as the currency futures. Some day traders prefer the currency markets, and some day traders prefer the currency futures. I recommend the currency futures as they do not suffer from some of the problems that currency markets suffer from, such as currency brokers trading against their clients, and non centralized pricing.

  • How Is Currency Trading Done?
  • Why Do Currency Values Change?
  • Is Currency Trading Risky?
  • Who Trades Currencies?
  • Current Scenario
  • Contract Specifications Of Currency Futures

Retail currency trading is typically done through brokers and market makers. Traders can place trades through their brokers who will in turn place a corresponding trade on the interbank market.

Currency values can change for many reasons. Sometimes they react to political and economic news, sometimes they are driven by speculators, and sometimes they are driven by international business flows. If companies in the United States are importing large quantities of products made in Europe, they will need to exchange their US Dollars for Euros to pay for the products. When this is done in very large quantity over a short period of time, it raises the demand for Euros and the value of the Euro versus the US Dollar increases. This happens because dollars are being sold on the open market, while Euros are being bought.

Currency trading can be very risky. Currencies tend to be very volatile compared to other markets. The real key to success with currency trading is to use conservative risk management. There are many components to effective currency risk management, but the bottom line is to use caution and have a trading plan.

Currencies are traded by individual retail investors, financial institutions, and corporations doing business. Retail investors and banks are trade to make profits and corporations usually trade in the normal course of the international business process.

As an emerging economy India has crossed difficult phase now and is in the verge of showing its presence in the world's economy. Currency trading in India is not only lucrative but also challenging too. Economic growth and continuous currency import in country has helped in the emergence of new currency trading India that differs from the rest on various perspectives.So you can't underestimate currency trade in India in the present scenario. Concept of currency trading works on single process of betting on currency exchange rates between various countries whose currencies are involved. The Currency futures trading (USD/INR pair) in India started on August 29, 2008 on National Stock Exchange followed by trading on Bombay Stock Exchange and thereafter on MCX-SX. Currency forward, on the other hand, continue to trade on the OTC market. As more than a year has passed since the introduction of currency futures, a comparison of the two markets i.e. Exchange traded currency futures and the OTC currency forward market has been carried out based on the following parameters:

Turnover in currency futures vis-à-vis OTC currency forward market
Bid Ask spread in Exchange traded currency market and OTC currency market
Difference in the futures and forward rates for same duration contracts
Participation pattern in the two markets

Currency futures trading (USD/INR pair) in India started on August 29, 2008 on National Stock Exchange followed by trading on Bombay Stock Exchange and thereafter on MCX-SX. In India, currently four currency pairs are traded(USD/INR, EURO/INR, GBP/INR And JPY/INR) with a lot size of 1000 units of the base currency, except JPY where the lot size is 100,000. Settlement for the customer is, however, done in Rupee terms and not in the foreign currency.

Features Details
Unit of trading 1 (1 unit denotes 1000) except JPY (100,000)
Underlying The exchange rate in INR for USD/EUR/GBP/ JPY
Tick size INR 0.0025
Trading hours Monday to Friday (9.00 am to 5.00 pm)
Contract trading cycle 12 month trading cycle.
Final settlement day Last working day of the expiry month.
Final settlement day Last working day of the expiry month.
Position limits Clients (per exchange): 6% of total open interest or USD 10 mn, whichever is higher.
Minimum-Initial margin 4% of notional value of the contract.
Extreme loss margin 1%
Settlement Daily : T+ 1
Final : T+ 2
Mode of settlement Cash settled in INR
Daily settlement price (DSP) Calculated on the basis of last half an hour weighted average price.
Final settlement price (FSP) RBI reference rate.(Last working day of the month)
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