Mumbai: The MCX Stock Exchange (MCX-SX) has been granted permission to launch currency options on its platform by SEBI and the RBI.
This approval will allow MCX-SX to expand its offerings in the currency derivatives segment by introducing currency options in the dollar-rupee currency pair, said a release from the exchange on Sunday.
The exchange held a mock-trading session on Saturday. It is yet to announce when it will rollout live trading of currency options.
“Options have the comparative advantage of maintaining a certain degree of flexibility in hedging. Introduction of this product completes the spectrum of hedging instruments available on the MCX-SX currency segment and adds further efficiency to risk mitigation mechanism in USD-INR,” said Joseph Massey, MD and CEO, MCX-SX.
This makes MCX-SX, the third exchange to offer trading in this segment after the NSE and the USE (2010). “With the introduction of one more player, there will definitely be better competition. It is good for the industry and will have a positive impact on costs also. At present, the rupee is very volatile so it looks like it’s a good time to launch another currency options platform,” said Naveen Mathur, Director, Angel Broking.
At the beginning of the calendar, the NSE had a turnover of Rs 98,530 crore and the USE Rs 273.63 crore in the currency options segment.
Currency options grants the holder the right, but not the obligation, to buy or sell currency at a specified exchange rate during a specified period of time.
At present, MCX-SX offers trading only in the currency futures segment. Last month, MCX-SX received permission from SEBI to launch its equity trading platform.
On its currency futures segment, contracts are traded in dollar-rupee, euro-rupee, yen-rupee, and pound- rupee.
In FY 2011-12, the exchange had a market share of 43.7 per cent in currency futures. The average daily turnover has increased to Rs 13,530.47 crore (July 2012) from Rs 324.78 crore in its first month of operation.
The exchange is used by SMEs, treasury of large corporates (importers and exporters), banks, institutions and individuals involved in forex transactions.
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