Introduction of Rupee Derivatives at IFSC

भारतीय रिज़र्व बैंक RESERVE BANK OF INDIA www.rbi.org.in

RBI/2019-20/145 A.P. (DIR Series) Circular No.17 January 20, 2020

All Authorised Dealers

Madam / Sir,

Introduction of Rupee derivatives at International Financial Services Centres (IFSC)

Attention of Authorised Dealers is invited to the Foreign Exchange Management (International Financial Services Centre) Regulations, 2015 (Notification No. FEMA. 339/2015-RB dated 2nd March, 2015).

2. As announced in the statement on Developmental and Regulatory Policies dated October 4, 2019, it has now been decided to allow Rupee derivatives (with settlement in foreign currency) to be traded in International Financial Services Centres (IFSCs), starting with Exchange Traded Currency Derivatives(ETCD).

3. Currency futures contracts may be listed on recognised stock exchanges at IFSCs subject to the Currency Futures in International Financial Services Centre (Reserve Bank) Directions, 2020 (Notification No.FMRD.FMD.01/ED(TRS)-2020 dated January 20, 2020), issued by the Reserve Bank of India, a copy of which is annexed (Annex I).

4. Currency options contracts may be listed on recognised stock exchanges at IFSCs subject to the Currency Options in International Financial Services Centre (Reserve Bank) Directions, 2020 (Notification No.FMRD.FMD.02/ED(TRS)-2020 dated January 20, 2020), issued by the Reserve Bank of India, a copy of which is annexed (Annex II).

5. Necessary amendments to the Foreign Exchange Management (International Financial Services Centre) Regulations, 2015 (Notification No. FEMA. 339/2015-RB dated 2nd March, 2015) have been notified in the Official Gazette vide Gazette Id no.CG-DL-E-17012020-215530 dated January 16, 2020 a copy of which is annexed (Annex-III).

वित्तीय बाज़ार विनियमन विभाग ,केंद्रीय कार्यालय, 9वीं मंजिल, केंद्रीय कार्यालय भवन, शहीद भगत सिंह मार्ग ,फोर्ट, मुंबई 400 001, भारत Financial Markets Regulation Department, Central Office, 9th Floor, CO Building, Shahid Bhagat Singh Road, Fort, Mumbai – 400 001, India फोन/Tel: (91-22) 2260 1000, फैक्स/Fax: (91-22) 22702290, ई-मेल /E-Mail: cgmfmrd@rbi.org.in हिन्दी आसान है, इसका प्रयोग बढ़ाइए

---

भारतीय रिज़र्व बैंक RESERVE BANK OF INDIA www.rbi.org.in

6. Amendments to Currency Futures (Reserve Bank) Directions, 2008 (Notification No.FED.1/DG(SG) - 2008 dated August 6, 2008), as amended from time to time, and Exchange Traded Currency Options (Reserve Bank) Directions, 2010 (Notification No. FED.01/ED(HRK) - 2010 dated July 30, 2010), as amended from time to time, is annexed as Annex IV & V respectively.

7. The above Directions have been issued under Section 45W of the Reserve Bank of India Act, 1934 and the above Regulation have been issued under Section 47 of the Foreign Exchange Management Act, 1999 (42 of 1999).

8. The directions contained in this circular have been issued under Sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and are without prejudice to permissions /approvals, if any, required under any other law.

Yours faithfully,

(Saswat Mahapatra) Deputy General Manager (O-i-C)

वित्तीय बाज़ार विनियमन विभाग ,केंद्रीय कार्यालय, 9वीं मंजिल, केंद्रीय कार्यालय भवन, शहीद भगत सिंह मार्ग ,फोर्ट, मुंबई 400 001, भारत Financial Markets Regulation Department, Central Office, 9th Floor, CO Building, Shahid Bhagat Singh Road, Fort, Mumbai – 400 001, India फोन/Tel: (91-22) 2260 1000, फैक्स/Fax: (91-22) 22702290, ई-मेल /E-Mail: cgmfmrd@rbi.org.in हिन्दी आसान है, इसका प्रयोग बढ़ाइए

---

भारतीय रिज़र्व बैंक RESERVE BANK OF INDIA www.rbi.org.in

Annex I

Notification No. FMRD.FMD.01/ED(TRS)-2020 dated January 20, 2020

Currency Futures in International Financial Services Centre (Reserve Bank) Directions, 2020

The Reserve Bank of India having considered it necessary in public interest and to regulate the financial system of the country to its advantage, in exercise of its powers conferred by section 45W of the Reserve Bank of India Act, 1934 and of all the powers enabling it in this behalf, hereby gives the following directions to all the persons dealing in currency futures listed on recognised stock exchanges in the International Financial Services Centres (IFSCs).

1. Short title and commencement of the directions - These directions may be called the Currency Futures in International Financial Services Centre (Reserve Bank) Directions, 2020 and they shall come into force with effect from the date of its publication.

2. Definitions -

• i. ‘Act’ means the Reserve Bank of India Act, 1934.
• ii. ‘Currency Futures contract’ means a standardised foreign exchange derivative contract traded on a recognised stock exchange in IFSCs to buy or sell one currency against another on a specified future date, at a price specified on the date of contract, but does not include a forward contract.
• iii. ‘Currency Futures market’ means the market in which currency futures are traded.
• iv. ‘Financial institution’ shall have the same meaning assigned to it in section 2(b) of the Foreign Exchange Management (International Financial Services Centre) Regulations, 2015 (as amended from time to time) issued vide notification no. FEMA. 339/2015-RB dated March 02, 2015

वित्तीय बाज़ार विनियमन विभाग ,केंद्रीय कार्यालय, 9वीं मंजिल, केंद्रीय कार्यालय भवन, शहीद भगत सिंह मार्ग ,फोर्ट, मुंबई 400 001, भारत Financial Markets Regulation Department, Central Office, 9th Floor, CO Building, Shahid Bhagat Singh Road, Fort, Mumbai – 400 001, India फोन/Tel: (91-22) 2260 1000, फैक्स/Fax: (91-22) 22702290, ई-मेल /E-Mail: cgmfmrd@rbi.org.in हिन्दी आसान है, इसका प्रयोग बढ़ाइए

---

भारतीय रिज़र्व बैंक RESERVE BANK OF INDIA www.rbi.org.in

• v. ‘International Financial Services Centre’ shall have the same meaning assigned to it in clause (q) of section 2 of The Special Economic Zones Act, 2005 (Act 28 of 2005).
• vi. ‘Recognised stock exchange’ means a stock exchange recognised under section 4 of Securities Contracts (Regulations) Act, 1956 (Act 42 of 1956).
• vii. ‘SEBI’ means the Securities and Exchange Board of India established under the Securities and Exchange Board of India Act, 1992 (15 of 1992).
• viii. ‘FBIL Reference rate’ means the rates of currency pairs computed and published on a daily basis, on all Mumbai business days, by Financial Benchmarks India Private Limited.
• ix. The words and expressions used but not specified in these directions shall have the same meanings respectively assigned to them in the Act.

3. Permission -

• i. Currency futures contracts are permitted in any currency pair involving the Rupee or otherwise.
• ii. Persons resident in India, as defined in clause (v) of section 2 of Foreign Exchange Management Act, 1999 (Act 42 of 1999), unless specifically permitted by the Reserve Bank, shall not be eligible to undertake currency futures contracts.
• iii. Persons resident outside India, as defined in section 2(w) of Foreign Exchange Management Act, 1999 (Act 42 of 1999), shall be eligible to undertake currency futures contracts.

4. Features of currency futures - Currency futures shall have the following features:

• i. All currency futures contracts shall be settled in a currency other than the Indian Rupee.
• ii. The settlement price for currency futures contracts involving Rupee shall be the FBIL Reference rate, where available, on the last trading day of the contract. For currency futures contracts involving Rupee where FBIL reference rates are not available and for other currency pairs, the mechanism for arriving at the