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Suspecting foul play in currency derivatives trade by certain brokers and traders, Sebi has asked the exchanges to enhance their surveillance for any unauthorised trading being done through benami entities.
The capital markets regulator has asked the bourses to collect details about trading activities of all their members for new clients in the currency derivatives segment, sources said.
Besides, the exchanges have also been asked to keep a check on any shift in market positions of the existing clients, sources said.
There are fears that some entities are shifting their market exposure to newly created benami clients to evade regulatory curbs, especially in rupee-dollar contracts, sources added.
Some commodity brokers, including one from a large brokerage group, are already being probed for trading through separate client codes -- other than their allotted Unique Client Codes (UCC) -- to conceal their overall positions.
They are suspected to be conducting trades through benami entities to avoid the reduced position limits.
With an aim to help in government's efforts to stem falling rupee, Sebi earlier this month tightened the exposure norms for currency derivatives to check large scale speculative activity in the market.
The decision was taken after consultations with banking regulator RBI, which has also tightened its norms for banks' exposure to the forex derivatives.
While it is RBI that mainly regulates the forex market, the currency derivatives come under Sebi's jurisdictions and they are traded on the stock exchanges.
RBI is also concerned over possible surge in speculative activities in the rupee-dollar market and is accordingly looking into the matter.
Currency derivative trading allows traders and investors to take forward views on various currency pairs, including rupee-dollar.
In recent times, there have been apprehensions that large-scale speculations on currency pairs is adding to the downward pressure on the rupee, which recently fell to a new low below 61 level against the US dollar.
However, it has recovered some of the lost ground since then and now trades slightly above 60 level, after regulators unleashed a slew of steps to curb speculative trades.
Sebi has reduced the exposure that brokers and their clients can take on currency derivatives and also doubled their margins on dollar-rupee contracts.
The market regulator had said the move has been initiated in the view of recent turbulent phase of extreme volatility in USD-INR exchange rate.
The exposure to all currency contracts for a broker has been capped at 15% of their overall exposure, or $50 million, whichever is lower.
For clients, this cap would be 6%, or $10 million, whichever is lower.
The current exposure limits for brokers and clients are the higher amounts of 15% of their overall exposure or $50 million, and 6% or $10 million, respectively.
The regulator also suspects that brokers and traders might be indulging in unauthorised trading of foreign exchange in the spot forex market, sources said, while adding that these issues are being flagged to the Reserve Bank.
The brokers are luring gullible investors to place bets on currency pairs on promises that rupee is going to touch even lower levels.
Meanwhile, volumes in currency derivatives market have fallen sharply since Sebi and RBI stepped in to curb speculative trades.
However, the data shows that the fall in volumes is not similar for different exchanges and the decline in volumes at one of the bourses is less compared to the others.
