Currency Futures

Stock and Index Futures Vs Currency Futures in India

Published

10 years ago

November 8, 2014

Piper

Stock and Index Futures Vs Currency Futures in India

Currency future is the most recent financial product in India that has generated huge interest among equity traders and other investors in stock markets. NSE (National Stock Exchange of India), the most favorite stock exchange of India, is the first recognized exchange in India that has already launched currency futures trading from 29 August 2008. In just three weeks of its commencement, the exchange has clocked reasonably good turnover and open interest build up in the currency future contracts.

Lots of investors and traders in stocks and index (Sensex, NIFTY, Junior NIFTY etc) future are enthusiastic about trading in currency futures in India. Currency future trading very much resembles to stock future or index futures trading. Carry on reading further to get an idea about the comparison between currency future and NIFTY future (most actively traded security in India).

Currency Future Vs NIFTY Future

Parameter	Currency Future	NIFTY Future
Symbol	USDINR Example – USDINR250908	NIFTY Example – FUTIDXNIFTY25SEP2008
Underlying Asset	Exchange rate for USD in terms of INR	S&P CNX NIFTY
Unit of trading or Lot Size	1000 USD (Approximately Rs.45,000)	50 units (Approximately Rs.2,00,000)
Tick Size or Price Steps	0.25 paisa or Rs. 0.0025; (4 ticks = 1 paisa)	5 paisa or Rs. 0.05
Trading Hours or Exchange Timing	9.00 am to 5.00 pm	9.55 am to 3.30 pm
Contract Trading Cycle or Contract Maurity/Expiry	12 months At any time there are twelve monthly contracts available for trading	3 months At any time there are three monthly contracts available for trading – near month, mid month and far month
Daily MTM settlement	On T+1 basis as per DSP (Daily Settlement Price)	On T+1 basis as per DSP (Daily Settlement Price)
DSP (Daily Settlement price)	Last half an hour’s weighted average price	Last half an hour’s weighted average price
Margins	Margins will be equal to initial margin + extreme loss margin + SPAN margin. Approximately = Rs.2,500	Margins will be equal to initial margin + extreme loss margin + SPAN margin. Approximately = Rs.30,000
Last Trading Day of the Contracts	2 business days before the last business day of contract month Note: Trading stops at 12.00 noon on the last trading day	Last Thursday of the month (if it is a holiday, then it expires on the previous day) Note: Trading stops at 3.30 pm on the last trading day
Final Settlement Day	Last business day of the expiry month (T +2 days); T is the expiration day or last trading day	T +1 days; T is the expiration day or last trading day
Final Settlement Mode	Cash settlement in INR as per RBI reference rate on the last trading day NOTE: RBI declares its reference rate at 12.00 noon and that is why the trading stops at 12.00 noon on the last trading day	Cash settlement as per the closing price of the contract on the expiry day; Closing price is the weighted average price of last half an hour’s trades
Quantity Freeze NOTE: Quantity freeze is only for preventing inadvertent errors in the order entry	10,000	15,000
Price Bands NOTE: Price band is only for preventing inadvertent errors in the order entry	+/- 3% of the base price for contracts up to 6 months tenure and +/- 5% for contracts with tenure greater than 6 months	+/- 10%
Position Limits	Client: 6% of total open interest or $5 million, whichever is higher Trading member: 15% of total open interest or $25 million, whichever is higher Bank: 15% of total open interest or $100 million, whichever is higher	Gross open position limits for client across all contracts shall not exceed 1% of free float market capitalization OR 5% of open interest in all the derivative contracts in the same underlying Whichever is higher