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Notification No. FEMA 303/2014-RB dated 21st May, 2014)
Risk
Management and Inter-bank Dealings: Guidelines relating to
participation of Foreign Portfolio Investors (FPIs) in the Exchange
Traded Currency Derivatives (ETCD) market
Presently, persons
resident outside India are not allowed to participate in the currency
futures and exchange traded currency options market in India
This
circular now permits eligible foreign portfolio investors (FPI) to
enter into currency futures or exchange traded currency options
contracts subject to the following terms and conditions: –
a. F PI
can access to the currency futures or exchange traded currency options
for the purpose of hedging the currency risk arising out of the market
value of their exposure to Indian debt and equity securities.
b. F
PI are permitted to participate in the currency futures/exchange traded
options market through any registered/recognised trading member of the
exchange concerned.
c. F PI are permitted to take position – both
long (bought) as well as short (sold) – in foreign currency up to US $
10 million or equivalent per exchange without having to establish
existence of any underlying exposure. This limit will be both day-end as
well as intra-day.
d. FPI cannot take a short position beyond US $ 10 million at any time.
e.
F PI can take a long position beyond US $ 10 million in any exchange if
it has an underlying exposure. The onus of ensuring the existence of an
underlying exposure is on the FPI concerned.
f. E xchanges are free
to impose additional restrictions as prescribed by SEBI for the purpose
of risk management and fair trading.
g. E xchange/clearing
corporation has to provide FPI wise information on day end open position
as well as intra-day highest position to the respective custodian
banks. The custodian banks will aggregate the position of each FPI on
the exchanges as well as the OTC contracts booked with them (i.e., the
custodian banks) and other banks. If the total value of the contracts
exceeds the market value of the holdings on any day, the concerned FPI
will be liable to such penal action as may be laid down by the SEBI and
RBI.
RBI has issued the Notifications No.FED.1/ED (GP) – 2014
dated 10th June, 2014 (Currency Futures (Reserve Bank) Amendment
Directions, 2014) and No. FED. 2/ED (GP) – 2014 dated 10th June, 2014
(Exchange Traded Currency Options (Reserve Bank) Amendment Directions,
2014) to give effect to the above.
