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MUMBAI : In late evening circulars stock exchanges NSE and BSE directed their member-brokers to take note of the RBI circular of 5 January on hedging of foreign exchange risk , which restricts the use of exchange traded currency derivatives (ETCD) to hedging only from 5 April onwards . ..
The circulars , according to some brokers, could spell the end of the 16-year-old ETCD as most of those who infuse liquidity into the marketproprietary and retail clientsact as counterparties to hedgers . . "Attention is drawn to RBI notification on 'Risk Management and Inter-Bank Dealings -- Hedging of foreign exchange risk' dated January 05, 2024..
After the circulars were issued by the two exchanges, top brokers who offer currency derivatives trading said that they would put clients' forex contract pairs involving rupee on square-off mode from 2 April . ..
Another broking executive said the use of the terms "valid underlying contracted exposure" in the RBI circular had necessitated putting client positions in square-off mode "as we are not clear on what the terms meant and don't want to fall foul of FEMA rules.".
The Reserve Bank of India's (RBI) 5 January circular said that users can take exposure up to $100 million across all contracts involving the rupee, without any existing underlying exposure..
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