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IN-DEPTH ANALYSIS ANDMARKET SURVEY OF
CURRENCY MARKET IN INDIA
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COMPANY PROFILE GUINESS SECURITIES LIMITED was incorporated as a
private limited company in 1986
In 1988 the company obtained NBFC Registration
In 2004 the company became the Depository Participant
Of National Securities & Depositories Ltd. ( NSDL )
In 2006 , the company launched its online trading
portal "www.16anna.com" for providing Internet based
trading facility
In 2006 , its group company became SEBI Registered
Portfolio Manager
In 2007 the company became the Depository Participant
Of Central Depository Services Ltd.( CDSL )
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INTRODUCTION
Currency futures were first created at the ChicagoMercantile Exchange (CME) in 1972
Currency trading started in India on 29 Aug 2008
As per BIS report OTC market accounts for more
than $3 trillion of currency every day
The most liquid market in the world
No STT and TOT as of now
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TYPES OF TRADERS
HedgersHedgers trade with an objective to minimize the risk in trading or holding the
underlying securities.
Speculators
Speculators use derivatives to bet on the future direction of the markets. They
take calculated risks but the objective is to gain when the prices move as per
their expectation.
Arbitrageurs
Arbitrageurs try to make risk-less profit by simultaneously entering into
transactions in two or more markets or two or more contracts. They profit from
market inefficiencies by making simultaneous trades that offset each other
thereby making their positions risk-free.
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FUTURE VS. FORWARD
Future
Standardized lot size
Traded on exchange
Exchange provides the guarantee of
settlement and hence no counter
party risk
Forward
Non-standardized lots
Informal Over-the-Counter market
Counter-Party risk is present since
no guarantee is provided
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CONTRACT SPECIFICATIONSContracts USDINR EURINR GBPINR JPYINR
Lot Size 1000 1000 1000 100000
Trading Hours Mon-Fri
(9A.M-5P.M)
Mon-Fri
(9A.M-5P.M)
Mon-Fri
(9A.M-5P.M)
Mon-Fri
(9A.M-5P.M)
Tick Size 0.25 paise or
INR 0.0025
0.25 paise or
INR 0.0025
0.25 paise or
INR 0.0025
0.25 paise or
INR 0.0025Expiry 2 working
days before
the last
working day
of the month
@ 12 Noon
2 working
days before
the last
working day
of the month
@ 12 Noon
2 working
days before
the last
working day
of the month
@ 12 Noon
2 working
days before
the last
working day
of the month
@ 12 Noon
Settlement Last working
day of the
month
Last working
day of the
month
Last working
day of the
month
Last working
day of the
month
Trading Cycle 12 Months 12 Months 12 Months 12 Months
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TRADING IN CURRENCY FUTURES
To provide a liquid, transparent and vibrant market for foreign exchange risk
management SEBI & RBI have allowed trading in currency futures on stock
exchanges
To provide Indian businesses another tool of hedging and managing their riskeffectively and efficiently at transparent rate on an electronic trading platform
To provide a mechanism for price risk management and to provide price curve of
expected future prices
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COST INVOLVED
Brokerage
Service Tax (10.3% of brokerage)
Stamp Duty
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COST COMPARISON
Equity F&O Commodity NSEL Currency
Exchange
Fees
.0001% .0001% N.A N.A .0001%
Stamp Duty .002% .01% .001% .002% .0025%
TOT .0035% .002% MCX (250)NCDEX
(400)
.005% N.A
STT .025% (Sale
side)
.017% N.A N.A N.A
Brokerage .02% .02% .02% .02% .02%
Service
Charge
10.3% on
Brok.
10.3% on
Brok.
10.3% on
Brok.
10.3% on
Brok.
10.3% on
Brok.
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TRADING VOLUME COMPARISON NIFTY
VS. USD-INR VS. GOLD (FIG. IN CR.)
Trade Date Nifty USDINR GOLD
07-03-2011 5145.78 16415.28 8064.86
04-03-2011 6522.01 14779.41 7537.70
03-03-2011 8848.97 19272.25 10405.04
01-03-2011 7411.09 16953.99 6870.77
28-02-2011 10276.18 19408.73 7611.17
25-02-2011 7679.23 16850.83 6810.95
24-02-2011 11011.16 15289.64 7807.75
23-02-2011 7203.80 16560.291 7158.97
22-02-2011 7383.12 17705.71 8002.31
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ADVANTAGES AT EXCHANGE
Transaction Cost: Relatively low, regulated andtransparent
Standardized Contracts: All contracts asstandardizedand have same specifications
Price Transparency: Prices are same and transparentfor everyone across the country
Margin: margins are very low
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Trading in Odin Preview
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CONCLUSION
By far the most significant event in finance during the past decade has beenthe extraordinary development and expansion of financial derivatives
The currency future gives the safe and standardized contract to its investors
and individuals who are aware about the forex market or predict the
movement of exchange rate so they will get the right platform for the trading
in currency future
Initially only NSE had the permission but now BSE and MCX has also started
currency future. It is shows that how currency future covers ground in the
compare of other available derivatives instruments. Not only big businessmen
and exporter and importers use this but individual who are interested andhaving knowledge about forex market they can also invest in currency futur
Exchange between USD-INR markets in India is very big and these exchange
traded contract will give more awareness in market and attract the investors
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RECOMMENDATIONS
Being a responsible Stock Broking firm all brokers should work their best and
in good faith to satisfy the needs of investors
People should be made more aware of the existence of currency market
People taking time to adapt with commodity market so proper demonstration
should be given to create that interest
Long term holding of currency should be allowed as it is available in case of
equity shares. Equity is a risky and more profitable segment so there is long
term holding but currency which is less volatile and so automatic squaring offis done on expiry
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