Union Currency Futures - Union Bank of India

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Treasury and Other Products > Treasury > Products And Services > Currency Futures

Currency Futures

Currency futures are standardized, exchange-traded contracts to buy or sell a currency at a specific price sometime in the future. As an essential tool to manage the risks associated with changing currency valuations, Currency futures allow market participants to lock in a currency rate for a specific time period.

At the same time, Currency futures offer a means of potential profits for those who wish to take a view on currency fluctuations, and in doing so accept the risk that businesses and financial institutions wish to offset with electronic trading and efficient risk management systems. Exchange traded currency future allow Corporate and Households alike to hedge their currency risk, to protect or increase investment returns and to trade in USDINR, EURINR, GBPINR and JPYINR without the need to have an underlying exposure.

Comparative features for four-permitted currency pair is given below.

	USD-INR	EUR-INR	GBP-INR	JPY-INR
Underlying	USD-Indian Rupee (USDINR)	Euro-Indian Rupee (EURINR)	Pound Sterling – Indian Rupee (GBPINR)	Japanese Yen – Indian Rupee (JPYINR)
Trading Hours	9 a.m. to 5 p.m	9 a.m. to 5 p.m	9 a.m. to 5 p.m	9 a.m. to 5 p.m
Size of the contract	USD 1,000	Euro 1,000	GBP 1,000	Japanese Yen 1,00,000
Quotation	The contract would be quoted in rupee terms. However, the outstanding positions would be in USD terms.	The contract would be quoted in rupee terms. However, the outstanding positions would be in Euro terms.	The contract would be quoted in rupee terms. However, the outstanding positions would be in Pound Sterling terms.	The contract would be quoted in rupee terms. However, the outstanding positions would be in Japanese Yen terms.
Tenor of the contract	The maximum maturity of the contract would be 12 months.	The maximum maturity of the contract would be 12 months.	The maximum maturity of the contract would be 12 months.	The maximum maturity of the contract would be 12 months.
Available contracts	All monthly maturities from 1 to 12 months would be made available.	All monthly maturities from 1 to 12 months would be made available.	All monthly maturities from 1 to 12 months would be made available.	All monthly maturities from 1 to 12 months would be made available.
Settlement mechanism	Cash settled in Indian Rupee.	Cash settled in Indian Rupee.	Cash settled in Indian Rupee.	Cash settled in Indian Rupee.
Settlement price	The settlement price would be the Reserve Bank Reference Rate for USDINR on the date of expiry.	The settlement price would be the Reserve Bank Reference Rate for EURINR on the date of expiry.	GBPINR Exchange rate published by the Reserve Bank in its Press Release captioned RBI Reference Rate for US$ and Euro.	JPYINR Exchange rate published by the Reserve Bank in its Press Release captioned RBI Reference Rate for US$ and Euro.
Final settlement day	The final settlement day would be the last working day of the month (excluding Saturday). The last working day would be taken to be the same as that for Interbank Settlements in Mumbai. The rules for Interbank Settlements, including those for ‘known holidays’ and ‘subsequently declared holiday’ would be those as laid down by FEDAI.
Initial Margin	The initial margin so computed would be subject to a minimum of 1.75% on the first day of trading and 2% thereafter.	The initial margin so computed would be subject to a minimum of 2.80% on the first day of trading and 2% thereafter.	The initial margin so computed would be subject to a minimum of 3.20% on the first day of trading and 2% thereafter.	The initial margin so computed would be subject to a minimum of 4.50% on the first day of trading and 2.30% thereafter.
Calendar spread margin	The calendar spread margin shall be at a value of ` 400 for a spread of 1 month; ` 500 for a spread of 2 months, ` 800 for a spread of 3 months and `1000 for a spread or 4 months or more. . The benefit for a calendar spread would continue till expiry of the near month contract. This is subject to change from time to time	The calendar spread margin shall be at a value of ` 700 for a spread ` 1000 for a spread of 2 months and `1500 for a spread of 3 months or more. The benefit for a calendar spread would continue till expiry of the near month contract. This is subject to change from time to time	The calendar spread margin shall be at a value of `1500 for a spread of 1 month; `1800 for a spread of 2 months and ` 2000 for a spread of 3 months or more. The benefit for a calendar spread would continue till expiry of the near month contract. This is subject to change from time to time	The calendar spread margin shall be at a value of ` 600 for a spread of 1 month; ` 1000 for a spread of 2 months and `1500 for a spread of 3 months or more. The benefit for a calendar spread would continue till expiry of the near month contract. This is subject to change from time to time
Extreme Loss margin	Extreme loss margin of 2% on the mark to market value of the gross open positions	Extreme loss margin of 0.3% on the mark to market value of the gross open positions	Extreme loss margin of 0.5% on the mark to market value of the gross open positions	Extreme loss margin of 0.7% on the mark to market value of the gross open positions
Position Limits for Bank	The gross open positions of the client across all contracts shall not exceed 15% of the total open interest or USD 100 million whichever is higher.	The gross open positions of the client across all contracts shall not exceed 15% of the total open interest or EUR 50 million whichever is higher.	The gross open positions of the client across all contracts shall not exceed 15% of the total open interest or GBP 50 million whichever is higher.	The gross open positions of the client across all contracts shall not exceed 15% of the total open interest or JPY 1000 million whichever is higher.
Client Level Position Limit	The gross open positions of the client across all contracts shall not exceed 6% of the total open interest or USD 5 million whichever is lower.	The gross open positions of the client across all contracts shall not exceed 6% of the total open interest or EUR 5 million whichever is higher.	The gross open positions of the client across all contracts shall not exceed 6% of the total open interest or GBP 5 million whichever is higher.	The gross open positions of the client across all contracts shall not exceed 6% of the total open interest or JPY 200 million whichever is higher.

As per Regulatory changes from time to time.

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