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IN-DEPTH ANALYSIS ANDMARKET SURVEY OF

CURRENCY MARKET IN INDIA

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COMPANY PROFILE GUINESS SECURITIES LIMITED was incorporated as a

private limited company in 1986

In 1988 the company obtained NBFC Registration

In 2004 the company became the Depository Participant

Of National Securities & Depositories Ltd. ( NSDL )

In 2006 , the company launched its online trading

portal "www.16anna.com" for providing Internet based

trading facility

In 2006 , its group company became SEBI Registered

Portfolio Manager

In 2007 the company became the Depository Participant

Of Central Depository Services Ltd.( CDSL )

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INTRODUCTION

Currency futures were first created at the ChicagoMercantile Exchange (CME) in 1972

Currency trading started in India on 29 Aug 2008

As per BIS report OTC market accounts for more

than $3 trillion of currency every day

The most liquid market in the world

No STT and TOT as of now

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TYPES OF TRADERS

HedgersHedgers trade with an objective to minimize the risk in trading or holding the

underlying securities.

Speculators

Speculators use derivatives to bet on the future direction of the markets. They

take calculated risks but the objective is to gain when the prices move as per

their expectation.

Arbitrageurs

Arbitrageurs try to make risk-less profit by simultaneously entering into

transactions in two or more markets or two or more contracts. They profit from

market inefficiencies by making simultaneous trades that offset each other

thereby making their positions risk-free.

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FUTURE VS. FORWARD

Future

Standardized lot size

Traded on exchange

Exchange provides the guarantee of

settlement and hence no counter

party risk

Forward

Non-standardized lots

Informal Over-the-Counter market

Counter-Party risk is present since

no guarantee is provided

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CONTRACT SPECIFICATIONSContracts USDINR EURINR GBPINR JPYINR

Lot Size 1000 1000 1000 100000

Trading Hours Mon-Fri

(9A.M-5P.M)

Mon-Fri

(9A.M-5P.M)

Mon-Fri

(9A.M-5P.M)

Mon-Fri

(9A.M-5P.M)

Tick Size 0.25 paise or

INR 0.0025

0.25 paise or

INR 0.0025

0.25 paise or

INR 0.0025

0.25 paise or

INR 0.0025Expiry 2 working

days before

the last

working day

of the month

@ 12 Noon

2 working

days before

the last

working day

of the month

@ 12 Noon

2 working

days before

the last

working day

of the month

@ 12 Noon

2 working

days before

the last

working day

of the month

@ 12 Noon

Settlement Last working

day of the

month

Last working

day of the

month

Last working

day of the

month

Last working

day of the

month

Trading Cycle 12 Months 12 Months 12 Months 12 Months

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TRADING IN CURRENCY FUTURES

To provide a liquid, transparent and vibrant market for foreign exchange risk

management SEBI & RBI have allowed trading in currency futures on stock

exchanges

To provide Indian businesses another tool of hedging and managing their riskeffectively and efficiently at transparent rate on an electronic trading platform

To provide a mechanism for price risk management and to provide price curve of

expected future prices

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COST INVOLVED

Brokerage

Service Tax (10.3% of brokerage)

Stamp Duty

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COST COMPARISON

Equity F&O Commodity NSEL Currency

Exchange

Fees

.0001% .0001% N.A N.A .0001%

Stamp Duty .002% .01% .001% .002% .0025%

TOT .0035% .002% MCX (250)NCDEX

(400)

.005% N.A

STT .025% (Sale

side)

.017% N.A N.A N.A

Brokerage .02% .02% .02% .02% .02%

Service

Charge

10.3% on

Brok.

10.3% on

Brok.

10.3% on

Brok.

10.3% on

Brok.

10.3% on

Brok.

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TRADING VOLUME COMPARISON NIFTY

VS. USD-INR VS. GOLD (FIG. IN CR.)

Trade Date Nifty USDINR GOLD

07-03-2011 5145.78 16415.28 8064.86

04-03-2011 6522.01 14779.41 7537.70

03-03-2011 8848.97 19272.25 10405.04

01-03-2011 7411.09 16953.99 6870.77

28-02-2011 10276.18 19408.73 7611.17

25-02-2011 7679.23 16850.83 6810.95

24-02-2011 11011.16 15289.64 7807.75

23-02-2011 7203.80 16560.291 7158.97

22-02-2011 7383.12 17705.71 8002.31

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ADVANTAGES AT EXCHANGE

Transaction Cost: Relatively low, regulated andtransparent

Standardized Contracts: All contracts asstandardizedand have same specifications

Price Transparency: Prices are same and transparentfor everyone across the country

Margin: margins are very low

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Trading in Odin Preview

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CONCLUSION

By far the most significant event in finance during the past decade has beenthe extraordinary development and expansion of financial derivatives

The currency future gives the safe and standardized contract to its investors

and individuals who are aware about the forex market or predict the

movement of exchange rate so they will get the right platform for the trading

in currency future

Initially only NSE had the permission but now BSE and MCX has also started

currency future. It is shows that how currency future covers ground in the

compare of other available derivatives instruments. Not only big businessmen

and exporter and importers use this but individual who are interested andhaving knowledge about forex market they can also invest in currency futur

Exchange between USD-INR markets in India is very big and these exchange

traded contract will give more awareness in market and attract the investors

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RECOMMENDATIONS

Being a responsible Stock Broking firm all brokers should work their best and

in good faith to satisfy the needs of investors

People should be made more aware of the existence of currency market

People taking time to adapt with commodity market so proper demonstration

should be given to create that interest

Long term holding of currency should be allowed as it is available in case of

equity shares. Equity is a risky and more profitable segment so there is long

term holding but currency which is less volatile and so automatic squaring offis done on expiry

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