India allows cross-currency futures and options
In December the Reserve Bank of India issued guidelines for introduction of additional futures and options based on foreign currencies, a move that could lead to a major expansion in the volume of currency derivatives traded on India's exchanges.
The central bank guidelines cover futures based on four currency pairs: Euro-US dollar, pound sterling-U.S. dollar and U.S. dollar-Japanese yen. The central bank also permitted the introduction of options based on the exchange rates for Euros, pounds sterling, and Japanese yen versus the Indian rupee.
The guidelines fulfill a commitment made by the RBI in September, when it announced several measures to encourage the development of the currency derivatives market. The central bank said the expansion will enable "direct hedging of exposures in foreign currencies and permit execution of cross-currency strategies by market participants."
Currently India's exchanges are limited to offering futures on four foreign currencies versus the Indian rupee as well as options on the U.S. dollar versus the rupee. The contracts have been extremely popular, with more than a billion traded in 2015. The contract size is quite small, however, with the U.S. dollar futures and options based on just 1,000 dollars.
