Currency Derivatives

MTFSL is a member of  National Stock Exchange of India Ltd.  NSE. Currency Futures are issued for standard quantity of one currency against another currency on a specified future date, at a price specified on the date of contract.

Investors can, by closing out their position, exit from their obligation to buy or sell the currency prior to the contract's delivery date. However with advances in technology, and the global nature of the market, it is now possible for traders of all levels of experience to take part in online currency trading. It offer traders huge opportunities to benefit from fluctuations in the currency markets and eliminate underlying foreign currency fluctuation risk arising due to reasons such as commodity trading, international trading, frequent overseas travelling, close correlations with equity indexes and international investments.

 

These are basically risk management tools in foreign exchange and money markets used for hedging risks and act as insurance against unforeseen and unpredictable currency movements. Any individual or corporate expecting to receive or pay certain amounts in foreign currencies at future date can use these products to opt for a fixed rate - at which the currencies can be exchanged now itself. Risks arising out of borrowings, in foreign currency, due to currency rate can be contained with a nominal cost. If receivables/payments/expenditure are denominated. or are to be incurred in multiple currencies. then derivatives can be used for matching the inflows and outflows. Presently US Dollar, GBP, Japanese Yen and Euro are available in the currency futures segment.

All Currency Future contracts are traded (buy or sell) on recognized exchanges. Today FX market is one of the largest and most liquid financial markets in the world, with highest volumes. The average daily volume in the global forex and related markets is continuously growing. 

Market Players
Broadly, there are four types of market players:

Hedgers : to reduce foreign exchange risk.
Investors : in the hope of making a profit.
Arbitrageurs : to make profit from price differential in different markets.
Traders : seek opportunities in volume, volatility and liquidity in the market.

Flows Driving Currency

  • Trade and Capital Flows
  • Imports by Oil Marketing Companies
  • Remittance by NRIs
  • Investment by Offshore Institutions in India & Indian Investments Offshore
  • FDI & FII Flows

Free Account Opening
MTFSL provides the privilege of free account opening with fewer KYC documents procedure. All Indian resident Individuals and Non Individuals can open account in currency trading.

Eligible constituents

  • Individual
  • Sole Proprietors
  • HUF
  • Partnership
  • Domestic Body corporate

In-house Research and Advisory Team for best servicing
We at MTFSL believe in providing independent research for clients to make investment decisions, with strict emphasis on self-regulation, avoiding possible conflict of interest in objectivity. Backed by a strong pool of highly skilled research analysts, we offer varied research products and services.

Daily Research Reports
Dedicated Corporate Desk to understand and cater to the needs of Exporter and Importer clients. A dedicated team is always available at your service.

Customized attractive brokerage scheme

With wide range of brokerage plans to offer, which suite your trading requirement. MTFSL offers flexible brokerage plans to choose and match the trading expectation of customer.

Participant Risk Underlying Position Hedging Position
Importer

Currency of Import will strengthen

Buyer of Currency of Import

Long in Currency of Import

Exporter

Currency of Export will weaken

Seller of Currency of Export

Short in Currency of Export

Futures vs Forwards
Following are the limitations for Corporates while hedging through Banks:-

  • Annex to A.P (DIR Series) Circular No.32 dated December 28, 2010 don’t allow companies below Rs 200 Cr net worth to enter into any option products in OTC.
  • Companies having access to options cannot write/sell options or cannot be net receiver of premiums Example : An exporter cannot sell CALL or Importer cannot sell PUT option with the BANK.
  • Derivatives like Interest rate & Currency swaps may have interest payments to be received/paid at some intervals and if those need to be hedged, RBI doesn’t permit the same.
  • Proceeds (profits booked) before maturity of Forwards/Cancellation are only passed to the clients on the expiry of contract.
  • There is mandate for submitting the underline documents to Bank against all the foreign exchange contracts within 15 days of booking.
  • Requirement of underlying while dealing with bank involves too much of process, human involvement, compliance and reporting which impacts to cost.
  • In the event of non-submission of underlying documents within 15 days, the contract may be cancelled, and the exchange gains are not passed on. If it is repeated on more than three occasions in a financial year, booking may be allowed only against production of the underlying documents at the time of booking the contract.

» RBI Report of the Internal Working Group on Currency Futures :
» RBI Circular for 15 Dec, 2011                

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