InvestorQ : Can you throw some light on the currency derivative contracts traded on NSE?
Neelam Naik made post

Can you throw some light on the currency derivative contracts traded on NSE?

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Mahima Roy answered.
3 years ago
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Currency trading is also based on minimum lot size. The only difference is that the lot size in currency trading is defined in value terms and not on quantity terms. The minimum lot size for a USD/INR pair is $1000, which is the equivalent of Rs.74,000 approximately. The unit remains the same although the value changes with the change in the value of the dollar.

Let us now look at how currency contracts expire. Currency derivative contracts will expire on the last working day of the month. At any point there will be a total of 12 monthly contracts that will be open for trading. The minimum tick size is 0.25 basis points which is equivalent to 0.0025. That is the reason all forex quotes are typically expressed up to 4 places of decimals.

In terms of settlement, the currency derivatives are cash settled exactly like equities. Unlike in commodities, where you also have the option of taking delivery of the commodity, in case of currency derivatives, you have to cash settle the contract. But in equity derivatives, the futures can trade till 3.30 on the settlement date. In case of currency futures trading is allowed only up to 12.30 pm on T-2 days (2 days prior to the settlement). The actual settlement on the last day will happen based on the RBI reference rate on that date.

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