NSE Forex Futures Trading

[Alchemist]

Forex futures trading will officially start at NSE from tomorrow (August 29th 2008).

BSE and MCX are also setting up similar platforms for trading in forex derivatives.

Around 10 banks and 300 trading members will be participating in the trading tomorrow.

For the first time, retail investors without any foreign exchange exposure, will also be allowed to trade.

To start with, only dollar-rupee pair will be traded.

The trading and settlement for forex futures will be similar to stock futures, but the timings and settlement dates will be different.

The lot size for the dollar-rupee futures contract will be $1000.

This is much smaller compared to the lot sizes of stock futures.

Also, the margins applicable to forex futures will be much smaller compared to margins applicable to stock futures.

Hence, I expect that a lot of speculative activity to shift from stock futures to forex futures. (This will happen gradually).

(In developed economies, forex trading generates much more volume than stock trading).

Only resident Indians will be allowed to trade in forex futures.

As of now, no STT (securities transaction tax) will be levied on forex futures, but this may change later.

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12 monthly contracts will be available.

Trading timings will be 9 AM to 5 PM on Monday to Friday.

Trading in near-month forex futures will stop at 12 PM, 2 days prior to the settlement day.

Settlement will be on last business day of every month.

Currently, the Over-The-Counter (OTC) market for forex forwards in India has a daily turnover of $34 billion.

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It will be some time (few weeks or maybe even months) before brokers start offering forex futures trading to retail clients.