CURRENCY TRADERS ALERT! SEBI tweaks norms, sets limits in futures, options contracts – Know how will it impact you

The Securities and Exchanges Board of India (SEBI) after feedback from stock exchanges and clearing corporations has made changes to the client level position limits for trading in cross-currency futures and options contracts.

The capital market regulator on Tuesday released circular mentioning changes in the currency derivative contracts. The position limit refers to the highest number of futures or options contracts an investor is allowed to hold on to one underlying security.

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The gross open positions of the client across all contracts in the respective currency pairs will not exceed the limits set up by the regulator. Notifying the same, SEBI decided below changes with respect to important global currencies.

In this regard, for USD-INR, SEBI said that gross open position across all contracts will not exceed 6 per cent of the total open interest or USD 20 million, whichever is higher.

In EUR-INR case, the gross open position across all contracts will not exceed 6 per cent of the total open interest or 10 million euros, whichever is higher. 

With regard to GBP-INR, gross open position across all contracts will not exceed 6 per cent of the total open interest or 10 million pounds, whichever is higher. 

And, for JPY-INR, SEBI said gross open position across all contracts will not exceed 6 per cent of the total open interest or JPY 400 million Japanese yen, whichever is higher. 

SEBI said, “The revised position limits shall also apply to Non-Resident Indians (NRIs) and Category II Foreign Portfolio Investors (FPIs) that are individuals, family offices, and corporate.”

The position limits for Category I FPIs and Category II FPIs, other than individuals, family offices, and corporates, will continue to remain the same, the regulator added.

It mentioned that exchanges or clearing corporations may specify additional safeguards/ conditions, as deemed fit, to manage risk and to ensure orderly trading. And, the provisions of this circular shall come into force with immediate effect, SEBI added.