Regulators assessing need to relax curbs on currency derivatives: SEBI chief news
01 October 2008

Mumbai: The Reserve Bank and the Securities and Exchange Board of India (SEBI) are assessing demands by market participants to relax restrictions on currency derivatives, SEBI chairman C B Bhave has said.

''Already, people have started demanding that the restrictions that have been put on currency trading should be relaxed,'' Bhave said at the launch of currency derivatives on the Bombay Stock Exchange (BSE), the second exchange to launch the product.

In August, National Stock Exchange launched exchange-traded rupee futures and a unit of Multi Commodity Exchange of India has plans to launch currency futures soon.

''There are certain core principles that cannot be compromised and therefore, it should not be subject to the spirit of competition,'' he said.

The SEBI chief urged exchanges not to compete by giving ''little bit of latitude'' on margins or other things which affect the sanctity of settlement.

''SEBI is closely monitoring markets and has verified with the stock exchanges that there are no settlement issues. Yesterday's settlement went through smoothly and it is expected that the settlement tomorrow also will be smooth. The clearing and settlement mechanism of the stock exchanges is a time tested mechanism which has been tested in times of great volatility,'' he said.

At present, the rules regarding short sale are that institutions are allowed to short sell only if they have borrowed the stock on the stock exchanges. At present, there are no volumes in the borrowing/lending market. Therefore, there is no concern that institutions may be short selling, he said.

''Short sales by retail are permissible but the stock has to be delivered on a T+2 basis. If any entity delivers short, the position is auctioned. If SEBI finds that any institution has violated the short sale rule, SEBI will take the most stringent action against such entity, if any. At present, there are no indications that such a violation has occurred,'' he added.


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Regulators assessing need to relax curbs on currency derivatives: SEBI chief