INDIA: Review of the Framework of Position Limits for Currency Derivatives Contracts

Thursday June 23 2016

Pursuant to the Securities and Exchange Board of India Act, 1992 in order to protect the interests of investors in securities and to promote the development of, and to regulate the securities market, the Securities and Exchange Board of India (SEBI) has issued a clarification on position limit linked to open interest that shall be applicable at the time of opening a position. Such positions shall not be required to be unwound in the event of a drop of total open interest in a currency pair at the stock exchange.

However, the eligible market participants shall not be allowed to increase their existing positions or create new positions in the currency pair till they comply with the applicable position limits.

Stock exchanges may direct the market participants to bring down their positions to comply with the applicable position limits within the time period prescribed by the stock exchange.

Stock Exchanges and Clearing Corporations have been directed to:

(a)    Take necessary steps to put in place systems for implementation of the circular, including necessary amendments to the relevant bye-laws, rules and regulations.

(b)   Bring the provisions of the circular to the notice of the stock brokers/ clearing members and also disseminate the same on their website;

(c)    Communicate to SEBI the status of implementation of the provisions of this circular.

Depositories are directed to forward this circular to DDPs, who shall in turn bring the contents of this circular to the notice of the FPIs registered with them.

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