Pursuant to recent approvals received by MCX Stock Exchange (MCXSX) from market regulator Securities and Exchange Board of India (SEBI) and Reserve Bank of India (RBI) for introducing Currency Options, MCX-SX will commence live trading in Currency Options from Friday, August 10, 2012, the company said in the press release.
The exchange completed four successful mock trading sessions from August 4, 2012 to August 8, 2012, drawing in nationwide participation from 387 members.
The European style Call & Put Options on USD-INR will have a lot size of US$1,000 per contract and quoted and settled in Indian rupees. Exchange will be introducing three monthly serial contracts followed by one quarterly contract. All outstanding positions of these contracts will be settled on RBI reference rates. The market timings will be from 9.00 am to 5.00 pm from Monday to Friday.
The smaller tick size of 10 bps, which is the specialty of MCX-SX USDINR option contracts, would further ensure better price discovery, increased hedge effectiveness and cost-effective risk management for the spectrum of stakeholders.
Additionally, the smaller tick size offers opportunities for ease of entry and exit to the participants and reduced financial impact in situations where market moves against expectations.
Commenting on the development, Mr. Joseph Massey, MD&CEO, MCX-SX, said, "The innovation in Currency Options contract is in line with our philosophy to introduce products based on a consultative process with industry and feedback from market participants. The differentiation introduced in Currency Options will offer the most efficient product for our participants. This product completes the spectrum of hedging instruments available on the MCX-SX currency segment and adds further efficiency to risk mitigation mechanism in USDINR."
With the introduction of Currency Options, MCX-SX is poised to further extend the benefits of effective risk management, hedging, inventory and cash flow management, treasury to a wider range of stakeholders, including SMEs, large Corporates (importers & exporters), banks, institutions and individuals involved in forex transactions etc.