Proposed Rupee Futures in a Regulatory Vice

The lot size has been kept at a mere $1,000, which is just about Rs 42,500 at today’s rate....To put things in perspective, the value of one lot of rupee futures is going to be half that of one lot of the Mini Nifty.

...Corporates are supposed to access the market only to hedge their forex exposures, not for speculative purposes...Cut to the futures market. Since there will be no delivery involved, all the trades will be termed speculative....even if a small exporter were to ‘hedge’ himself on the futures market, when it comes to realising rupees against his dollar receivables, he would still need to transact with a bank, which would charge him a steep 20 paise per dollar... let us suppose that skilled speculative trading gives rise to profits. Will corporates want to pay capital gains tax thereon...RBI’s report prescribes a client level open position limit of $5 million...

Lots of issues, but definitely better than no futures at all. Hopefully the RBI will react fast to market action and change or ease regulations accordingly.

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This entry was posted on Monday, July 21st, 2008 at 7:11 AM and is filed under Commentary. You can subscribe to any comments to this entry via RSS 2.0. You can leave a response, or trackback from your own site.