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Union Currency Futures About Currency Futures Currency futures are standardized, exchange-traded contracts to buy or sell a currency at a specific price sometime in the future. As an essential tool to manage the risks associated with changing currency valuations, Currency futures allow market participants to lock in a currency rate for a specific time period. At the same time, Currency futures offer a means of potential profits for those who wish to take a view on currency fluctuations, and in doing so accept the risk that businesses and financial institutions wish to offset with electronic trading and efficient risk management systems. Exchange traded currency future allow Corporate and Households alike to hedge their currency risk, to protect or increase investment returns and to trade in USDINR, EURINR, GBPINR and JPYINR without the need to have an underlying exposure.
Product Features
Comparative features for four-permitted currency pair is given below.
USD-INR
EUR-INR
GBP-INR
JPY-INR
Underlying
USD-Indian Rupee (USDINR)
Euro-Indian Rupee (EURINR)
Pound Sterling – Indian Rupee (GBPINR)
Japanese Yen – Indian Rupee (JPYINR)
Trading Hours
9 a.m. to 5 p.m
Size of the contract
USD 1,000
Euro 1,000
GBP 1,000
Japanese Yen 1,00,000
Quotation
The contract would be quoted in rupee terms. However, the outstanding positions would be in USD terms.
The contract would be quoted in rupee terms. However, the outstanding positions would be in Euro terms.
The contract would be quoted in rupee terms. However, the outstanding positions would be in Pound Sterling terms.
The contract would be quoted in rupee terms. However, the outstanding positions would be in Japanese Yen terms.
Tenor of the contract
The maximum maturity of the contract would be 12 months.
Available contracts
All monthly maturities from 1 to 12 months would be made available.
Settlement mechanism
Cash settled in Indian Rupee.
Settlement price
The settlement price would be the Reserve Bank Reference Rate for USDINR on the date of expiry.
The settlement price would be the Reserve Bank Reference Rate for EURINR on the date of expiry.
GBPINR Exchange rate published by the Reserve Bank in its Press Release captioned RBI Reference Rate for US$ and Euro.
JPYINR Exchange rate published by the Reserve Bank in its Press Release captioned RBI Reference Rate for US$ and Euro.
Final settlement day
The final settlement day would be the last working day of the month (excluding Saturday). The last working day would be taken to be the same as that for Interbank Settlements in Mumbai. The rules for Interbank Settlements, including those for ‘known holidays’ and ‘subsequently declared holiday’ would be those as laid down by FEDAI.
Initial Margin
The initial margin so computed would be subject to a minimum of 1.75% on the first day of trading and 2% thereafter.
The initial margin so computed would be subject to a minimum of 2.80% on the first day of trading and 2% thereafter.
The initial margin so computed would be subject to a minimum of 3.20% on the first day of trading and 2% thereafter.
The initial margin so computed would be subject to a minimum of 4.50% on the first day of trading and 2.30% thereafter.
Calendar spread margin
The calendar spread margin shall be at a value of ` 400 for a spread of 1 month; ` 500 for a spread of 2 months, ` 800 for a spread of 3 months and `1000 for a spread or 4 months or more. . The benefit for a calendar spread would continue till expiry of the near month contract. This is subject to change from time to time
The calendar spread margin shall be at a value of ` 700 for a spread ` 1000 for a spread of 2 months and `1500 for a spread of 3 months or more. The benefit for a calendar spread would continue till expiry of the near month contract. This is subject to change from time to time
The calendar spread margin shall be at a value of `1500 for a spread of 1 month; `1800 for a spread of 2 months and ` 2000 for a spread of 3 months or more. The benefit for a calendar spread would continue till expiry of the near month contract. This is subject to change from time to time
The calendar spread margin shall be at a value of ` 600 for a spread of 1 month; ` 1000 for a spread of 2 months and `1500 for a spread of 3 months or more. The benefit for a calendar spread would continue till expiry of the near month contract. This is subject to change from time to time
Extreme Loss margin
Extreme loss margin of 2% on the mark to market value of the gross open positions
Extreme loss margin of 0.3% on the mark to market value of the gross open positions
Extreme loss margin of 0.5% on the mark to market value of the gross open positions
Extreme loss margin of 0.7% on the mark to market value of the gross open positions
Position Limits for Bank
The gross open positions of the client across all contracts shall not exceed 15% of the total open interest or USD 100 million whichever is higher.
The gross open positions of the client across all contracts shall not exceed 15% of the total open interest or EUR 50 million whichever is higher.
The gross open positions of the client across all contracts shall not exceed 15% of the total open interest or GBP 50 million whichever is higher.
The gross open positions of the client across all contracts shall not exceed 15% of the total open interest or JPY 1000 million whichever is higher.
Client Level Position Limit
The gross open positions of the client across all contracts shall not exceed 6% of the total open interest or USD 5 million whichever is lower.
The gross open positions of the client across all contracts shall not exceed 6% of the total open interest or EUR 5 million whichever is higher.
The gross open positions of the client across all contracts shall not exceed 6% of the total open interest or GBP 5 million whichever is higher.
The gross open positions of the client across all contracts shall not exceed 6% of the total open interest or JPY 200 million whichever is higher.
As per Regulatory changes from time to time.
Eligibility
Only ‘persons resident in India’ may purchase or sell currency futures to hedge an exposure to foreign exchange rate risk or otherwise. The product is offered to the following categories of customers: a. All Exporters/Importers having a rating of CR5 and better b. Large Corporate/SME A/c holders having a rating of CR5 and better c. Any other customer based on his credit assessment.
Authorized Branches
The product is being offered to all eligible customers through all our Branches. However, Treasury Branch, Mumbai will be the controlling Branch. Opening of Currency Futures Trading Account Treasury Branch shall issue a Unique Client Code (UCC) to the Customer duly authenticated by the respective exchange on which customer wish to trade. The UCC will be required by the customers for trading in Currency Futures. Mode of Trading –Online. Position Limits Our Bank has fixed the category-wise upper limits as mentioned below subject to availability of the margins :
Sr. No.
Customer Type
Maximum Limit
1.
Individuals, Proprietorship Firms, HUFs
USD 1,000,000 equivalent
2.
Clients other than above category
USD 5,000,000 –equivalent
Margins can be deposited in Cash or Term Deposit .
Type of Margins: Initial Margin – Minimum 2% of the Notional Value of Contract or higher as per Exchange requirement based on the volatility of the market. Extreme Loss Margin – Minimum 2% on the mark to market value of the gross open position or as specified by the exchange from time to time. Mark to Market Settlement – The mark to market gain and losses shall be settled in cash before the start of trading on the next day i.e. on T+0 day basis.
Upfront Allocation of Required Margin -
To trade in currency futures contract, the client needs to give the required margins upfront to the Bank. The margin is presently fixed at 10% of the face value of the contract but can be modified by the Bank depending on market volatility. For example if client buys a near month contract at Rs 67 (i.e notional value of contract :67*1000=67000), he needs to pay upfront a margin of 10% approx) which amounts to Rs 6700 (10%*67,000)
Documentation The following documents are required to be submitted for opening of Currency Futures Trading account, which will be as per KYC norms and Exchange requirements:- i. Client Registration Form (Separate forms for Individuals/Corporate) ii. Risk Disclosure Document iii. Agreement between Trading member and Client iv. Undertaking cum Indemnity for direct access to Bank’s dealing room v. Authorization letter to Bank for sending Contract Notes/Statements electronically All these documents are attached herewith. After all the KYC formalities are done, Bank will open client account in Union Currency Futures and issue Unique Client Code to each client. All the details will be uploaded to the desired exchange of the client.
Mandatory/Non-mandatory list of documents
Pursuant to SEBI circular no. MIRSD/ SE /Cir-19/2009 dated December 3, 2009; the clients of currency derivative segment are informed as under of the following:
Mandatory and Non-Mandatory documents as per SEBI
DOCUMENT
TYPE
BRIEF SIGNIFICANCE
Individual Client Registration Form
Mandatory
This form is designed to capture the personal information of the client e.g. identity, PAN number, address, bank details for registration of the client in the Currency Derivatives segment (CDS) of the Exchange. Client is also required to choose the Exchange in which he wishes to trade for currency derivative segment. This is a KYC document.
Client Registration Form for Corporates, Firms and Others
Mandatory This form is designed to capture the information of the Non-Individual clients like name of the company, registered office address, bank details, name of promoters, whole time directors etc. for registration of the client in the CDS segment of the Exchange. Client is also required to choose the Exchange in which he wishes to trade for currency derivative segment. This is a KYC document.
Board Resolution
Non – Mandatory
Board resolution is required to be given by the company resolving the approval of the Board to undertake trading in Currency Futures and list all the persons who will act as Dealers and/or authorised signatories.
Agreement between Trading Member and Client
This agreement contains 24 clauses and is to be executed by the Client for the purpose of Registration on Currency Derivative Segment of the Exchange.
Member – Client Agreement (For Internet Based Trading)
This agreement contains 11 clauses and is to be executed by the Clients who are seeking to avail the internet based trading facility.
Letter of Authority
The Client authorises Union Bank through this letter to debit his account towards margin, brokerage and squaring off open positions towards margin shortfall.
Letter of Consent
The Client through this letter consents to recording of telephone conversations and confirmation of transactions through electronic mode.
Omnibus Request Letter
The Client through this letter authorises the bank to accept orders through different modes of communication and confirms that such orders shall constitute confirmed order instructions.
Investors' Rights and Obligations (2 copies) & Risk Disclosure document for Currency Derivatives Segment (2 copies)
The document states the risk in trading and Investors' rights and obligations as per the model format specified by SEBI. Applicant should have clearly read and understood both the documents before signing the same.
Policies and Procedures
This document contains policies and procedures which a Trading Member is required to disclose to the Client as per SEBI circular no. MIRSD/SE /Cir-19/2009 dated December 3, 2009.
Running Account Authorisation
The Client authorises Union Bank through this annually renewable letter to maintain a running account to retain the funds, deposited as margin money or received as pay-outs from the Exchanges
Brokerage/Other Charges
SEBI Reg. No.: NSE: INE231308946; MCX-SX: INE261314038; BSE: INE271382546 | Membership Code: NSE: 13089; MCX-SX: 1013; BSE: 4031 For any query/complaints contact
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