Re futures debuts on DGCX

The world's first rupee futures contracts debuted on the Dubai Gold & Commodities Exchange (DGCX) today, recording a modest turnover. A total of 634 lots of Rs 20 lakh each were traded on the exchange with the total turnover touching $31.18 million.

The exchange-traded rupee futures were being traded at more than double the margin in the dollar forwards market in India because of inadequate liquidity.

Prices were quoted in US cents per Rs 100. Most of the rupee futures contracts were traded around 245 cents per Rs 100. The futures contracts basically indicate market expectations of likely movement in the value of a currency.

The rupee futures contracts will be settled in euros. The rupee exposure risks are currently hedged in the non-deliverable forwards markets overseas and in the rupee forwards market in India. In the dollar forwards market in India, the daily turnover is around $3.5 billion and $1 billion in the NDFs market overseas .

Currency futures are standardised contracts settled at a specified price on a specified date and are guaranteed by the clearing houses. Unlike futures contracts, forwards contracts are negotiated between two parties for the delivery of a cash commodity to a buyer at a future date. Forwards contracts are normally traded in non-convertible currencies such as the Indian rupee. The rupee is not fully convertible on capital account. In the NDF market, only the notional gain or loss is exchanged on an agreed future date.

The DGCX contract, to be traded on Dubai's two-year-old commodities exchange, will compliment the forwards markets. Dubai is India's third-biggest trading partner.