InvestorQ : What could be the implications of the Metropolitan Stock Exchange (MSEI) launching weekly contracts in currency futures and in interest rate futures?
Debbie Mascarenhas made post

What could be the implications of the Metropolitan Stock Exchange (MSEI) launching weekly contracts in currency futures and in interest rate futures?

Answer
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Crowny Pinto answered.
8 months ago


The Metropolitan Stock Exchange of India (MSEI) became the first stock exchange in India to receive SEBI approval to launch weekly contracts on interest rate futures (IRFs) besides introducing weekly futures and options in cross three currency pairs viz. EUR-USD, GBP-USD, USD-JPY. Here is what you need to know about this launch.

a) MSEI has received permission to introduce weekly futures contracts on currency pairs such as USD-INR, EUR-INR, GBP-INR, JPY-INR and weekly options on EUR-INR, GBP-INR, JPY-INR. It is also allowed to launch IRFs.

b) MSEI proposes to give one-month notice to all trading members, clearing corporations and other exchanges and will start trading on these contracts shortly.

c) With the launch of weekly IRF contracts, the Indian fixed income market has the ability to hedge exposure from short-term policy moves like RBI policy decisions and other macro data indications. Since IRFs will have weekly convergence with interest rates, it will facilitate spread trading on interest rate futures during periods of rate volatility.

d) There is a fear that the weekly IRF will cannibalise monthly contracts by creating more avenues for hedging and speculation compared to monthly IRFs

e) Cross currency options weekly contracts gives the ability to hedge against specific policy changes by the US Fed, ECB, Bank of England as well as the Bank of Japan and the Peoples Bank of China.

f) For the exchange, which has been lagging the BSE and the NSE, this comes as a huge boost to push volumes in a very niche market. In fact, after the introduction of inter-operability among clearing corporations, MSEI saw good traction among institutional and HNI investors. These advantages can be consolidated.