The potential of India’s derivatives market has long been clear. But in 2010 it grabbed the world’s attention. Volume soared, new products began trading and new exchanges came online. The way ahead is hard to predict – regulators hold most of the cards. As Mareen Goebel reports, the energy in the market is palpable; the challenge will be to let it express itself safely.
For a demonstration of the dynamism of India’s
financial sector, there can be few better examples than the
country’s foreign exchange derivatives.
In 2010, the boom in trading at Multi
Commodity Exchange Stock Exchange and the National Stock
Exchange of India made their US dollar/Indian rupee futures the
two most actively traded currency derivatives on any exchange
in the world, by number of contracts.
While the contracts are small
– each future is for $1,000 – the level of activity is still remarkable.
It’s even more astonishing, since this is a purely
domestic market. Foreign investors are banned from trading
India’s currency futures. Even large domestic
companies struggle to meet their hedging needs in the market
because of position limits.
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