Chapter 10: Code of Conduct and Investor Protection Measure

SEBI’s Code of Conduct for Brokers: General: Maintain high standards of integrity, promptitude, and fairness in business conduct. Act with due skill, care, and diligence. Avoid manipulative, fraudulent, or deceptive transactions. Do not create false markets or engage in acts detrimental to investors’ interests. Comply with statutory requirements and regulations. Duty towards the Investor: Execute […]

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Chapter 9: Accounting and Taxation

Accounting Guideline and Disclosure Requirements: Accounting standards and valuation methods prescribed by ICAI or other standard-setting organizations or regulators apply to Exchange Traded Currency Derivatives. The ICAI has issued guidance notes on Accounting for Derivatives Contract (Revised 2021). Entities such as banking, NBFCs, housing finance companies, and insurance entities should follow the accounting treatment for […]

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Chapter 8: Regulatory Framework for Exchange-Traded Currency Derivatives

Introduction: Exchange-traded currency derivatives are regulated by the Reserve Bank of India (RBI) and the Securities and Exchange Board of India (SEBI). The operational rules and procedures for these derivatives are framed by the exchanges and clearing corporations under the statutory regulations of RBI and SEBI. Regulatory Authorities: RBI: The Foreign Exchange Management Act, 1999 […]

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Chapter 7: Clearing, Settlement and Risk Management in Exchange Traded Currency Derivatives

Clearing and Settlement in Exchange Traded Currency Derivatives: Clearing Corporation registered with SEBI for clearing and settlement of trades in Exchange Traded Currency Derivatives. Acts as a legal counterparty and guarantees financial settlement. Clearing, Settlement, and Risk Management are the main activities. Clearing and Settlement Mechanism: Clearing involves determining open positions and obligations of clearing […]

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Chapter 6: Trading Mechanism in Exchange Traded Currency Derivatives

Entities in the Trading System: Stock Exchanges: Provide a trading platform for buyers and sellers. Establish a nationwide trading facility for various financial instruments. Ensure equal access to investors through a communication network. Set rules and regulations to govern the securities market. Functions include providing a trading platform, dissemination of information, investor education and protection, […]

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Chapter 5: Strategies Using Exchange Traded Currency Derivatives

Market Participants The Exchange Traded Currency Derivatives (ETCD) market involves different types of market participants with distinct objectives. Understanding these participants is crucial for comprehending the uses of the market. The three main types of market participants are: Hedgers: Objective: Hedgers aim to protect themselves from the risk associated with price movements of foreign currencies. […]

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Chapter 3: Exchange Traded Currency Futures

Currency Futures: Futures contract: An agreement made through an organized exchange to buy or sell a fixed amount of a commodity or financial asset on a future date at an agreed price. Futures markets: Innovated to overcome the limitations of forwards, futures are standardized forward contracts that are traded on an exchange. The clearing corporation […]

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Chapter 2: Foreign Exchange Derivatives

Derivatives – Definition Derivative: Something derived from another called the underlying. Underlying: Independent asset, on which the derivative depends and is derived from. Derivative cannot exist without the underlying. Accounting Standards Criteria for Financial Derivatives: Value linked to underlying. Trade settled on a future date. No full cash outlay on trade date. FAS 133 (US): […]

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Chapter 1: Introduction to Currency Markets

History of Foreign Exchange Markets: The evolution of currency exchange can be traced back to the barter system, where goods were exchanged directly. Barter system faced challenges due to the non-divisibility of certain goods, transportation costs, and difficulties in valuing services. The need for a common medium of exchange led to the innovation of money, […]

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