Currency Derivatives Segment

Currency market internationally is very mature and large in terms of market share which is bigger than equity and commodity market. International currency markets are made up of banks, commercial companies, central banks, investment management firms, hedge funds, retail forex brokers and investors.

Indian currency markets have noticed heightened activities and extreme volatilities in last couple of years. The developments taking place in the Indian Forex market have brightened the prospects for investors and traders.

What is Currency market?

Participants from all round the world who can buy, sell, exchange and speculate on differnent currencies. The international currency market comprises of Banks, Commercial Companies, Central Banks, and Investment Management firms, Hedge Funds, Retail Forex and Investors.

What is Forex Trading?

Forex is Foreign Exchange Market which is global decentralized market for trading currencies. It is a buying, selling, exchange of currencies at a determined price.

What currencies are frequently traded in the Forex market?

Euro/US dollars (EUR/USD) - euro

Euro/US dollars (EUR/USD) - euro US dollar/Japanese yen (USD/JPY) - gopher

US dollar/Japanese yen (USD/JPY) - gopher British pound/dollar (GBP/USD) – cable

British pound/dollar (GBP/USD) – cable US dollar/Swiss franc (USD/CHF) – swissie

US dollar/Swiss franc (USD/CHF) – swissie Australian doller/US dollar (AUD/USD) – aussie

Australian doller/US dollar (AUD/USD) – aussie US dollar/Canadian dollar (USD/CAD) –loonie

Currency derivatives derivatives are a contract between the seller and buyer, whose value is to be derived from the underlying asset i.e. the currency value. A derivative based on currency exchange rate is an agreement that two currencies can be exchanged in a specific quantity of a particular currency pair at a future date.Currency Derivatives can be Future and Options contracts which are similar to the Stock Futures and Options but the underlying happens to be currency pair (i.e. USDINR, EURINR, JPYINR OR GBPINR) instead of Stocks. Currency Derivatives are available on four currency pairs viz. US Dollars (USD), Euro (EUR), Great Britain Pound (GBP) and Japanese Yen (JPY). Currency options are currently available on US Dollars.

What is an 'Exchange Traded Derivative'?

An exchange traded derivative is a financial instrument whose value is based on the value of another asset, and that trades on a regulated exchange. Futures and options are two of the most popular exchange traded derivatives. These derivatives can be used to hedge exposure or speculate on a wide range of financial assets like commodities, equities, currencies, and even interest rates.

What is currency trading?

Currency trading is the act of buying and selling international currencies for example USD-EUR or USD-YEN. Very often, banks and financial trading institutions engage in the act of currency trading. Individual investors can also engage in currency trading, attempting to benefit from variations in the exchange rate of the currencies.

How prices are determined?

Currency prices are affected by a variety of economic and political conditions, but probably the most important are interest rates, international trade, inflation, and political stability. Sometimes governments actually participate in the foreign exchange market to influence the value of their currencies. This is known as central bank intervention. Any of these factors, as well as large market orders, can cause high volatility in currency prices. However, the size and volume of the FOREX market make it impossible for any one entity to drive the market for any length of time.

Why to invest/trade in Currency?

Portfolio Diversification

Portfolio Diversification Hedging (specially for importers/exporters)

Hedging (specially for importers/exporters) Low margin – High leverage

Low margin – High leverage Limited Scripts to track

Limited Scripts to track Serves as a separate asset class for market savvy investors, arbitrageurs and speculators

Serves as a separate asset class for market savvy investors, arbitrageurs and speculators Far from Manipulation

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