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Efforts to build exchange-traded currency derivatives market miss the mark 

July 16, 2015

Ashish Rukhaiyar, LiveMint

Attempts to build an exchange-traded currency derivatives market in India as a way to give small and medium enterprises easier access to currency hedging tools have yielded little, with most of the volumes in this segment coming from those looking to profit from trading in derivatives rather than those looking to hedge their risks.

Brokerages are the biggest contributor to the volumes in the exchange-traded currency derivatives segment and account for more than half of the turnover through proprietary trading, data from regulators shows. Corporate entities account for a far lower share indicating that genuine end users still prefer to go to over-the-counter (OTC) market due to lower margins and customised deals.

On the National Stock Exchange of India Ltd (NSE), proprietary trading accounted for 57.15% of the total turnover in the currency derivatives segment between January and April, show data from the Securities and Exchange Board of India (Sebi). On BSE Ltd and the Metropolitan Stock Exchange of India Ltd (MSEI), the share of proprietary trading was 50.89% and 45.21% respectively over the same period.

Read more: LiveMint

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