Hedge against Currency Risk using Currency Futures for IT or ITES SMEs

11th December, 2009 at 4.00 p.m. at Hyder Mahal I, ITC Kakatiya, Hyderabad

ITsAP (Formerly HYSEA) organised a Seminar on "Hedge against Currency Risk using Currency Futures for IT / ITES SMEs by MCX-SX" on 11th December 2009 at Hyder Mahal I, ITC Kakatiya, Hyderabad.

The programme was designed for creating awareness on currency futures and discussed the advantages of currency hedging through Currency Futures. Also the strategies that IT / ITES SMEs can use to hedge against the Currency volatility.

It has always been felt liberalization of Indian economy in 1990s and the increasing exports and imports fuelled by higher growth rate in the last five years have led to doubling of volatility in the dollar-rupee (USD/INR) market. These factors, coupled with the integration of global asset class, increased remittances from non-resident Indians (NRIs), forex cash inflow and outflow by foreign institutional investors (FIIs), have led to increased risk for corporates and their clients having forex exposure.

Currency Futures is the latest product introduced in Indian securities markets. It will lead to further maturity and deepening of the financial markets in India. Worldwide, trading in currency futures is a US$ 4 trillion (Rs 200 lakh crore) market, and, given the rapid growth of Indian economy, it is poised to assume a significant role in the growth of Indian securities markets.

Exchange-traded currency derivatives segment operates under the regulatory control of the Securities & Exchange Board of India (SEBI) and Reserve Bank of India (RBI). This segment will enable importers, exporters, investors, corporations, and banks to hedge their currency risk at low transaction cost and with great transparency and safety. Currency futures will benefit small and medium enterprises (SMEs), which have hitherto not had easy access to the real time quotes of currency market.

About MCX - SX

MCX-SX—India’s New Stock Exchange — is a leader in offering nationwide electronic platform to trade in Currency (FX), and is poised to enter into Interest Rate Futures (IRF), Equities (Cash & F&O), Indices and ETF, Fixed Income (Debt) and SME (Small Medium Enterprises) products, subject to regulatory clearance.

Promoted by Multi Commodity Exchange of India Ltd. (MCX) and Financial Technologies (India) Ltd (FTIL), MCX-SX is recognized under Sec 4 of Securities Contracts (Regulation) Act, by Securities Exchange Board of India (SEBI). The exchange believes in “systematic development of financial markets through Information, Innovation, Education and Research” and, accordingly, has taken various measures to ensure that the markets are used by participants more effectively.

MCX-SX has started-up with futures trade in the USD/INR currency pair, and plans to introduce other currency pairs with prior regulatory approval. The all-India electronic trading platform of MCX-SX offers participants the benefits of high liquidity, trade transparency, easy online accessibility and counterparty guarantee. The Exchange is regulated and monitored by the RBI and SEBI and has the permission to provide a platform for USDINR currency futures in India for a tenor of up to 12 months.