Rs-$ trading at IFSC will deepen onshore mkt: India INX MD
New Delhi: With the RBI's monetary policy on Friday allowing rupee derivatives to be traded in IFSC Gift City in Gujarat, the launch of rupee-dollar trading will increase liquidity, India International Exchange (INX) MD and CEO V. Balasubramaniam said.
The Reserve Bank of India on Friday allowed rupee derivatives (with settlement in foreign currency) to be traded in International Financial Services Centres (IFSCs) to deepen the local bourses by bringing rupee trading home. India INX is a leading exchange in GIFT IFSC.
"Today's announcement is more in the form of a policy prescription. Now, the RBI will have to sit with SEBI and figure out what kind of products will be offered in the contracts space and then, the SEBI will have to issue a circular. SEBI already has allowed similar products in the BSE and the NSE, so the framework already exists.
"BSE and NSE cater to local investors in India. We will be address ing the foreign investors basically and we will be available across time zones from Japan to US and there investors can avail our services. We will be targeting all investors like NRIs, HNIs, foreigners brokerages operational in IFSC," Balasubramaniam told IANS.
The INX MD and CEO also said that they have started trading in gold and lot of offshore trading has come onshore.
"Today rival exchanges like Singapore Exchange are doing a lot of rupee-dollar (trade). It will attract a lot of liquidity. Foreign exchange markets are a 24 hour market. Our Indian markets on the BSE and NSE open for 9 (a.m.) to 5 (p.m.). That is a restriction but at IFSC, we trade almost 24 hours. Now with a proper methodology, rupee-dollar trading can happen all time," he said.
Balasubramaniam also said: "The RBI's statement today on development and regulatory policies allowing offshore rupee market products to be also permitted in GIFT IFSC is a great initiative. India INX, being the leading exchange in GIFT IFSC, welcomes this move and looks forward to launch the rupee-dollar futures and options trading once the approvals from SEBI and RBI are taken.
"This is a welcome move to onshore the offshore rupee-dollar markets which have been migrated to other international financial centres. We expect a lot of participants to now be attracted to the IFSC, and similar to other asset classes like equity index and gold, we look forward to build significant liquidity."
An RBI task force on offshore rupee submitted its report on July 30, recommending several steps to incentivise non-residents to access the onshore foreign exchange market.
"The directions for implementing recommendations will be issued in consultation with the Central government and other regulators. Other recommendations of the committee are under consideration and the decision thereon will be announced in due course," the RBI said in a release.
Such non-delivarable forwards trading will take place in the International Financial Services Centres which brings GIFT City in Gujarat as the only operational venue.
The RBI has been taking steps for the cross-border transactions in Indian rupee (INR), especially in respect of external commercial borrowing (ECB), trade credit and exports and imports, thereby reducing the exchange risk for persons resident in India.
The RBI also decided to enhance the scope of non-interest bearing special non-resident rupee (SNRR) account by permitting persons resident outside India to open such accounts to facilitate rupee denominated ECB, trade credit and trade invoicing. Further, the RBI also plans to ease restriction on the tenure of the SNRR account, which is currently 7 years. The RBI will issue guidelines within a month.
Trading in the onshore market has been shrinking at the expense of offshore rupee market, RBI Governor Shaktikanta Das said. London has surpassed India's financial capital Mumbai to become the top centre for trading rupee, according to the Bank for International Settlements last month.