70,000 contracts traded on first day of currency futures (Lead)

August 29th, 2008 - 9:09 pm ICT by IANS  

Mumbai, Aug 29 (IANS) Nearly 70,000 contracts were traded on the first day of trading in currency futures on the National Stock Exchange (NSE) here Friday, with banks accounting for bulk of the trade.The bid-ask spread remained very tight throughout the day at 0.25 paise (one tick - representing the smallest possible movement, up or down, in the price of a security).

This was tighter than usual higher spreads of around one paisa or higher seen in the forward market.

The first trade on the exchange was by East India Securities Ltd. Among the banks, HDFC carried out the first trade.

The largest trade was by Standard Chartered Bank constituting 15,000 contracts. In fact, banks contributed 40 percent of the total gross volume.

Twelve serial-month contracts were available for trading from September 2008 to August 2009.

The most active contract was September 2008 expiry with around 43,000 contracts being traded at a premium of 0.40 percent on the spot price.

Around 300 trading members including 11 banks were registered in this segment. Trading took place from across major centres of the country.

Finance Minister P. Chidambaram kicked off the currency futures at the NSE early in the morning, in a move that is particularly expected to help small- and mid-sized companies to hedge their risks while dealing in foreign exchange.

The first deal at the exchange-traded futures began at 8:45 a.m. with a lot size of $1,000 each, and within three hours, as many as 19,871 contracts had been executed, data with the stock exchange showed.

“After having launched currency futures, we need to revitalise exchange-traded interest rate derivatives markets, offer exchange-traded credit derivatives and also need to strengthen the corporate bond markets,” the finance minister said.

“These three products are high on the priority list of the government and I ask the government to move forward on this,” he said, adding that the aim was to build a sophisticated financial market in the country.

To encourage active participation in the currency derivatives segment, the stock exchange authorities decided not to levy transaction charge on trades till Sep 30. But members will have to pay Rs.500 towards the investor protection fund.

The Bombay Stock Exchange (BSE) and the Multi Commodity Exchange of India (MCX) have also received permission from the markets watchdog Securities and Exchange Board of India (SEBI) to start currency futures.

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