Download Master Circular for Currency Derivatives

Consolidated Master Circular
Currency Derivatives and IRD Segment
(As on December 30, 2016)
SR. No
TITLE
1.
PRICE BANDS OF CURRENCY FUTURES & OPTIONS
CONTRACTS
2.
POSITION LIMITS (CURRENCY)
3.
PENALTY FOR POSITION LIMIT VIOLATION IN CURRENCY
DERIVATIVES SEGMENT
4.
INTEREST RATE FUTURES CONTRACTS
5.
PRICE BANDS OF (IRD)
6.
POSITION LIMITS (IRD)
7.
PENALTY FOR POSITION LIMIT VIOLATION IN IRD
8.
PAN-BASED SELF-TRADE PREVENTION CHECK
9.
POLICY FOR ANNULMENT OF TRADES
10.
PAN-BASED REVERSAL TRADE PREVENTION CHECK
10.
REGULATORY DISCLOSURES
1.0 Price bands of Currency Futures & Options contracts:
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1.1. Currency Futures Contracts
For currency Future contracts, operating price bands will be kept at +/-3% of the
base price for contracts with tenure upto 6 months and 6% for contracts with tenure
greater than 6 months.
1.2. Currency Options Contracts
The Exchange has a contract specific price band based on the delta of the options
contract using underlying previous close price and volatility in Currency Derivative
Segment. Intra-day relaxation of the price band is based on the market trend.
1.2.1 Paired Option Contracts:
The Exchange introduced a new facility to enter orders in specialised contracts of
Paired options in its Currency Derivatives segment (w.e.f. December 07, 2015).
Paired option contracts allow a trader to take positions across two different option
contracts belonging to the same underlying asset and same expiry by entering a single
order.
The FAQ documents on Paired option contract functionality is available as Annexure
in Notice on Paired Contracts
1.2.2 Straddle Contracts:
The Exchange introduced a new facility to enter orders in specialised contracts of
Straddle in its Currency Derivatives segment (w.e.f. December 07, 2015).
Straddle contracts allow a trader to take positions across two different option contracts
belonging to the same underlying asset and same expiry by entering a single order.
The FAQ documents on straddle contract functionality is available as Annexure in
Notice on Straddle Contracts
1.3 Price Reasonability Check for Currency Derivatives Segment
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The Exchange introduced Price Reasonability Check (PRC), a risk management
feature in Currency Futures (w.e.f. 08th September, 2014). and in Currency Options
(w.e.f. 14th March, 2016).This check is introduced inlines of globally prevalent risk
management measures to primarily reduce potential instances of market abuse and
fat-finger errors and facilitate true price discovery and investor protection.
In PRC functionality, each new (incoming) limit order price shall be validated with
the Exchange defined Price Reasonability Range (PRR). PRR shall be dynamically
computed and applied by the trading system using a real-time reference price. This
shall ensure that the price of an incoming limit order is not too far off from the
prevailing market prices.
The Notice for the


PRC in Currency Futures
PRC in Currency Options
2.0 Position Limits (Currency):
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2.1 Trading members (bank and non-bank), Category I and II FPIs and DII
The gross open positions of the trading member across all contracts in the respective
currency pairs shall not exceed the limits as mentioned below.
Currency
Pairs
USD-INR
Position Limits
Gross open position across all contracts shall not exceed 15% of
the total open interest or USD 100 million, whichever is higher.
For Bank Stock Brokers as authorised by RBI -
EUR-INR
GBP-INR
JPY-INR
The gross open position across all contracts shall not exceed 15%
of the total open interest or USD 1 billion, whichever is higher.
Gross open position across all contracts shall not exceed 15% of
the total open interest or EUR 50 million, whichever is higher.
Gross open position across all contracts shall not exceed 15% of
the total open interest or GBP 50 million, whichever is higher.
Gross open position across all contracts shall not exceed 15% of
the total open interest or JPY 2000 million, whichever is higher.
The exchange implemented the revised Position Limits for the Bank Stock Brokers
who are authorised by RBI as per the Notice with effective from January 15, 2016.
Within the applicable position limits as mentioned above, position taken by the FPIs
in the currency derivative segment shall be subject to the following conditions:
Foreign Portfolio Investors (FPIs) may take long as well as short positions per stock
exchange upto the following limit without having to establish the existence of any
underlying exposure:
i.
USD-INR currency pair: USD 15 million;
ii.
EUR-INR, GBP-INR and JPY-INR currency pairs (all put together): USD 5
million.
FPIs shall ensure that their short positions at a stock exchange across all contracts in
USD-INR pair do not exceed USD 15 million and do not exceed USD 5 million in
EUR-INR, GBP-INR and JPY-INR pairs, all put together.
In the event a FPI breaches the short position limit, stock exchanges shall restrict the
FPI from increasing its existing short positions or creating new short positions in the
currency pair till such time FPI complies with the said requirement.
To take long positions in excess of USD 15 million in USD-INR pair and in excess of
USD 5 million in EUR-INR, GBP-INR and JPY-INR pairs, all put together, FPIs shall
be required to have an underlying exposure in Indian debt or equity securities,
including units of equity/debt mutual funds.
The position limits for the next day is made available on the website at the End of the
Day daily under : Daily Stock Brokers (Both bank and non-bank), FPIs Category I &
II Position Limits
2.2 Clients and category III FPIs, Standalone PD as a Client:
The gross open positions of the client across all contracts in the respective currency
pairs shall not exceed the limits as mentioned below;
Currency Pairs
Position limits
USD-INR
Gross open position across all contracts shall not exceed
6% of the total open interest or USD 10 million,
whichever is higher.
EUR-INR
Gross open position across all contracts shall not exceed
6% of the total open interest or EUR 5 million,
whichever is higher.
GBP-INR
Gross open position across all contracts shall not exceed
6% of the total open interest or GBP 5 million,
whichever is higher.
JPY-INR
Gross open position across all contracts shall not exceed
6% of the total open interest or JPY 200 million,
whichever is higher.
For the purpose of calculation of Client level gross open position, Long position
shall include Long Futures, Long Calls, and Short Puts and Short Position shall
include Short Futures, Short Calls, and Long Puts.
The Exchange disseminates alerts through e-BOSS System if the gross open
position of the client on the basis of PAN across all contracts exceeds the aforesaid
position limits or if the gross open position of the client on the basis of PAN across
all contracts in a Currency Pair exceeds 3% of the total open interest of the previous
day's trade at the end of the day.
2.3 Position taken by Domestic Clients within the applicable position limit shall be
subjected to the following conditions:
Domestic clients may take long as well as short positions per stock exchange upto the
following limit without having to establish the existence of any underlying exposure:
(i)
(ii)
USD-INR currency pair: USD 15 million;
EUR-INR, GBP-INR and JPY-INR currency pairs (all put together): USD 5
million
Domestic clients may take positions in excess of USD 15 million in USD-INR pair
and in excess of USD 5 million in EUR-INR, GBP-INR and JPY-INR pairs, all put
together, subject to the conditions specified in the RBI A.P. (DIR Series) Circular no.
147 dated June 20, 2014 and RBI A.P. (DIR Series) Circular no. 90 dated March 31,
2015.
In case of positions taken to hedge underlying exposure, the position limit linked to
open interest shall be applicable at the time of opening a position. Such positions shall
not be required to be unwound in the event a drop of total open interest in a currency
pair at a stock exchange. However, participants shall not be allowed to increase their
existing positions or create new positions in the currency pair till they comply with
the position limits.
The primary onus of ensuring compliance with the aforementioned provisions
shall rest with respective FPI / Domestic Clients.
The position limits for the next day is made available on the website at the End of the
Day daily under : Clients & FPI III wise Position Limits
2.4 Proprietary positions of non-bank Trading members and standalone PD as
Trading Members :
The gross open positions of the Trading member in its Proprietary account across all
contracts in the respective currency pairs shall not exceed the limits as mentioned
below.
Currency Pairs
Position Limits
USD-INR
Gross open position across all contracts shall not exceed
15% of the total open interest or USD 50 million, whichever
is higher.
EUR-INR
Gross open position across all contracts shall not exceed
15% of the total open interest or EUR 25 million, whichever
is higher.
GBP-INR
Gross open position across all contracts shall not exceed
15% of the total open interest or GBP 25 million, whichever
is higher.
JPY-INR
Gross open position across all contracts shall not exceed
15% of the total open interest or JPY 1000 million,
whichever is higher.
The position limits for the next day is made available on the website at the End of the
Day daily under : Daily Proprietary Position Limits of Non-Bank Trading Members
2.5 Conversion factor for converting from USD to GBP, EURO and YEN:
SEBI vide its circular number CIR/MRD/DP/ 04 /2015 dated April 08, 2015, stated that
Domestic clients may take positions in excess of USD 15 million in USD-INR pair and
in excess of USD 5 million in EUR-INR, GBP-INR and JPY-INR pairs, all put together,
subject to the conditions specified in the RBI A.P. (DIR Series) Circular no. 147 dated
June 20, 2014 and RBI A.P. (DIR Series) Circular no. 90 dated March 31, 2015.
In the view of the same, the exchange issues a circular applicable for the quarter before
the Expiry date of the current quarter, wherein the Exchange prescribes the fixed limits
for EUR-INR, GBP-INR and JPY-INR currency pairs within the equivalent of USD 5
million.
The conversion factors for the purpose of monitoring the aggregate position limit of
USD 5 Million across currencies viz. GBP-INR, EUR-INR and JPY-INR shall be
provided by the end of each quarter.
3.0 Penalty for position limit violation in Currency Derivatives Segment
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3.1 Trading member position limit violation
When the open position of any trading member, exceeds the specified limit at any time,
including during trading hours, it shall be treated as a violation. In case of violation the
Exchange may withdraw trading facilities of the trading member and shall place them
in the RRM mode and shall disallow them from putting any additional orders other than
square off orders
Additionally, penalty as mentioned below shall be levied for trading member position
limit violation in Currency Derivatives segment
Instances of Position Limit violations in a
calendar month
Penalty
1st instance
0.07% for an instance
2nd to 5th instance of disablement
0.07% + Rs. 1,000/- per instance from
2nd to 5th instance
6th to 15th instance of disablement
0.07% + Rs. 4,000/- (for 2nd to 5th
instance) + Rs.2,000/- per instance
from 6th to 15th instance
16th instance onwards
0.07% + Rs.24,000/- (for 2nd to 15th
instance) + Rs.2,000/- per instance
from 16th instance onwards.
Additionally, the member will be
referred to the Disciplinary Action
Committee for suitable action.
*Instances as mentioned above shall refer to all instances of violations of Position limits
during market hours in a calendar month.
3.2 Client level position limit violation
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When the open position of any client, exceeds the specified limit at the end of the day
the same shall be treated as a violation and a penalty of Rs. 5,000/- per violation / per
client shall be levied to the Trading members for every day of violation.
4.0 Interest Rate Futures Contracts:
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BSE’s Interest Rate Derivative Segment offers
4.1 91-day Government of India (GOI) Treasury Bill Futures (w.e.f. November
29,2013)
4.2 10 Year Government of India Futures (w.e.f. January 28, 2014)
4.3 13 Year Government of India Futures (w.e.f. August 03, 2015)
4.4 6 Year Government of India Futures (w.e.f August 03, 2015)
5.0 Price Bands (IRD):
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5.1. 91-day Government of India (GOI) Treasury Bill Futures):
The price bands for the T-Bills shall be +/- 1% of the base price at EOD for the
next trading day.
5.2. 6 Year /10 Year /13 Year Government of India Futures :
Initial price band at 3% of the previous closing price. If trade is executed at
lowest/highest price of the band, it may be expanded by 0.5% after 30 minutes.
Maximum two expansions in a day will be allowed. SEBI in consultation with
RBI may halt the trading in case of Extreme volatility in the IRF market.
6.0 Position Limits (IRD):
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6.1 91-Day Government of India (GOI) Treasury-Bill (T-bill):
6.1.1. Trading Member Level :
The gross open positions of the trading member across all contracts should not exceed
15% of the total open interest or Rs. 1000 crores whichever is higher.
Positions limits applicable for the next day are made available at EOD under, Position
Limits for Trading Members
6.1.2. Client Level :
The gross open positions of the client across all contracts should not exceed 6% of the
total open interest or Rs. 300 crores whichever is higher. The Exchange will
disseminate alerts through its e-BOSS system whenever the gross open position of the
client exceeds 3% of the total open interest at the end of the previous day's trade.
Positions limits applicable for the next day are made available at EOD under, Position
limits for Client / Schemes of MF
Positions limits applicable for the next day are made available at EOD under, FII / FPI
Positions
6.2 6 Year /10 Year /13 Year Government of India Futures
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6.2.1 Trading Member Level / FII / FPI Category I & II / Mutual Fund:
The gross open positions of the trading member across all contracts shall not exceed
10% of the total open interest or INR 600 crores, whichever is higher.
6.2.2 Client, Schemes of Mutual Funds and FPI Category III:
The Gross open position of the client across all contracts shall not exceed 3 % of the
total open interest or INR 200 Crores, whichever is higher.
6.2.3 Additional restriction:
The total gross short (sold) position of each FII / FPI in IRF shall not exceed its long
position in the government securities and in Interest Rate Futures, at any point in time.
The total gross long (bought) position in cash and IRF markets taken together for all
FII / FPIs shall not exceed the aggregate permissible limit for investment in
government securities for FII / FPIs (category I and II)
FII / FPIs (category I and II) shall ensure compliance with the above limits. Stringent
action shall be taken against FII / FPIs (category I and II) in case of violation of the
limits.
6.2.4 Exchange Level Overall Position Limit:
Exchange level overall open position limit on all IRF contracts on a specific underlying
shall be higher of INR 25,000 crore or 25% of the outstanding of underlying bond
whichever is higher.
6.3 Surveillance Obligation for Trading Members
The Exchange has provided a facility for effective surveillance at the member level
wherein the Exchange has derived the transactional alerts that would be downloaded to
the trading members which will facilitate the trading members to effectively monitor
the trading activity of their clients
7.0 Penalty for Position Limit Violation in IRD
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Same as that for the Trading Member Position limit violation and Client wise Position Limit
violation in the Currency Derivatives Segment
8.0 PAN-based Self-trade Prevention Check Functionality
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The Exchange introduced self-trade prevention check based on Permanent Account Number
(PAN) of clients in Currency Derivative Segment w.e.f. October 12, 2015. Using the PAN
details available in the Exchange records, the aforesaid check shall help prevent matching
between a buy and a sell order of a client placed by different members in the same order
book.
Notice for PAN based STPC in Currency Derivative Segment
9.0 Policy for Annulment of Trade
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The Exchange introduced Policy on Annulment of Trades and defined suitable criteria so as
to discourage frivolous trade annulment requests from the stock brokers being referred to the
Exchange. The framework for processing the trade annulment requests from trading members
for trades executed on the exchange trading platform is provided in the Notice link below.
Notice for Policy of Trade Annulment in Currency Derivative Segment
Notice for Policy of Trade Annulment Review in Currency Derivative Segment
10.0 PAN-based Reversal trade Prevention Check Functionality
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The Exchange introduced RTPC in Currency Derivatives segment with an intention to prevent
potential cases of trade reversal from June 06, 2016.In this functionality, second leg of a
potential reversal trade is automatically cancelled at the time of matching in the trading engine.
RTPC is applicable on both the Client code level and also as the PAN level. This check is
currently applicable on Trades and subsequent orders available on the same day. RTPC is
currently applicable on Currency Options contracts with Far Month and Quarterly expiries, in
the Currency Derivatives Segment.
Notice for PAN based RTPC in Currency Derivative Segment
11.0 Regulatory Disclosures:
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Positions of Connected Entities in Currency Derivatives Segment of the exchange:
If the combined position of any group exceeds client level positions limits as given by SEBI
circulars from time to time, the data of total open interest of each group in the USDINR,
JPYINR, GBPINR & EURINR currency pair of the Currency Derivatives Segment will be
disseminated on the website of the Exchange. The said details will be available at the following
link on BSE website.
Connected Entities Position Details
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