Currency Markets In India

Banks take a huge part in a country’s currency market. It is an OTC market. With the introduction of futures contracts, the market has witnessed wide-scale retail participation.

INR Futures Contract:

• Monthly contracts launched by SEBI & RBI on NSE and MCX-SX platform.
• Contracts available for 12 months. Currently, the first 3 months' contracts are the most liquid ones.
• Standardized contract specification prescribed by RBI.
• The cumulative average daily volume of over INR 5000 crores.

Advantage of Exchange and Margining System:

1.Presence of clearing corporations to protect the market.

2.Learn from mistakes:

• Current global financial as well as Indian currency market turmoil due to OTC products with no margin protection.
• The whole world is moving in favor of exchange-traded products now. The philosophy of corporate finance is changing.

3.Daily mark to market helps in real-time risk management and negates the possibility of over leveraging.

4.Although banks are not charging margins, the cost charged by them includes the cost against the risk associated with the trades.