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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

9 a.m. to 5 p.m

9 a.m. to 5 p.m

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.

The maximum maturity of the contract would be 12 months.  

The maximum maturity of the contract would be 12 months.

The maximum maturity of the contract would be 12 months.

Available contracts

All monthly maturities from 1 to 12 months would be made available.

All monthly maturities from 1 to 12 months would be made available.

All monthly maturities from 1 to 12 months would be made available.

All monthly maturities from 1 to 12 months would be made available.

Settlement mechanism

Cash settled in Indian Rupee.

Cash settled in Indian Rupee.

Cash settled in Indian Rupee.

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

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

Mandatory

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)

Non – Mandatory

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

Non – Mandatory

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

Non – Mandatory

The Client through this letter consents to recording of telephone conversations and confirmation of transactions through electronic mode.

Omnibus Request Letter

Non – Mandatory

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)

Mandatory

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

Mandatory

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

Non – Mandatory

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

  • No Account Opening charges
  • Brokerage Charges- within the maximum permissible limit stipulated by Exchange/SEBI
  • No Handling Charges (For initial one year period)
  • Free Online Trading Exchange platform (For initial one year period)
  • Stamp duty as applicable.
  • Transaction Charges as applicable by Exchange Houses.
  • Investor Protection Fees as applicable by Exchange Houses.
  • Any other applicable expanses.
    Reports

    • Digitally Signed Contract Notes
    • Daily Activity Report through e-mail

    Treatment of Inactive account & Process of reactivation-

    Till the margin money is deposited the account will be marked as “Inactive”. Also if  any customers fails to fulfill KYC or ANY OTHER regulatory requirement from time to time , even though sufficient margin money is with the Bank, it’s account status will be treated as “Inactive” and will be prohibited from trading till all the requirements are fulfilled.
    If the client has no open position & is not trading for more than 6 months then the account will be treated as inactive & will be suspended from trading.
    Client, who is desirous of reactivating the account post suspension, will have to send written request for reactivation.

    Risk Disclosures

    As Currency Futures permit trading without a need of underlying, it will create open position to the customers. As the price of currency is highly volatile, it may entail heavy losses in the form of losing the margin deposited by the client. The customers are advised to read the Risk Disclosure document to know about the risks involved in the Currency Futures trading.

    In case of any clarification, please contact:
    Derivatives Back Office,
    Union Bank of India,
    3rd Floor, Treasury Branch,
    Union Bank Bhavan,
    239, Vidhan Bhavan Marg,
    Nariman Point,
    Mumbai – 400 021
    Tel. No. 022-22892112, 022-22892143 & 022-22892142
    Disclaimer :
    Currency Futures are subject to market risk. Please read the Risk Disclosure Document and Investors' Rights and Obligations carefully before dealing in Currency Futures. In pursuant to SEBI circular no. SEBI/MRD/SE/Cir-42/2003 dated 19 November 2003 and subsequent circulars, the Bank wishes to disclose that the bank is engaged in dealing in Currency Futures for its proprietary book in addition to offering the product for the Client.

SEBI Reg. No.: NSE: INE231308946; MCX-SX: INE261314038; BSE: INE271382546 | Membership Code: NSE: 13089; MCX-SX: 1013; BSE: 4031
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