USE to offer currency futures

The NSE and MCX-SX exchanges will have a new competitor in currency futures trade from Tuesday.

The NSE and MCX-SX exchanges will have a new competitor in currency futures trade from tomorrow,with the United Stock Exchange commencing operations in the segment.

The United Stock Exchange of India (USE) is backed by Asias oldest bourse,the Bombay Stock Exchange,and will focus on currency derivatives initially.

The USE will facilitate trading in all four currency futures contracts currently allowed by capital markets regulator Securities and Exchange Board of India (Sebi).

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At present,currency futures trading is allowed in the country in four foreign currencies — the US Dollar,Pound Sterling,Japanese Yen and Euro.

Currently,the National Stock Exchange and MCX Stock Exchange (MCX-SX) are the two dominant players in the currency trading segment in the country.

Currency futures are transferable futures contracts that specify the price at which a specified currency can be bought or sold at a future date. Currency future contracts allow investors to hedge against foreign exchange risk.

In August,2008,Sebi had given approval for currency derivatives in the form of currency futures in India.

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The RBI and Sebi jointly regulate these products. While RBI approves the products,Sebi decides on the trading platforms.

The USE is promoted by 21 public sector banks,private banks and corporate houses. Its promoters include Allahabad Bank,Axis Bank,Canara Bank,HDFC Bank and Jaypee Capital.

The bourse got market regulator Sebis nod for launching currency futures trading in March this year.

BSE is also a strategic partner with USE,as it holds a 15 per cent stake and all its members are connected to the new USE platform.