Rupee Linked Derivatives in IFSC: A New Beginning

By Shubham Dimri, Law Graduate, Gujarat National Law University, Gandhinagar

Introduction

The NSE IFSC and BSE’s INX have started offering rupee linked derivatives on their platforms after receiving the approval from the Reserve Bank of India(RBI) and the Securities and Exchange Board of India(SEBI) early this year. This expands the bouquet of financial products offered in IFSC along with allowing for hedging of currency rate risk to prospective participants. The process of developing IFSC into a place, where rupee derivatives are traded, received a boost after the Task Force on Offshore Rupee Markets recommended that to prevent exchange rate shocks, currency rupee derivatives are needed to be brought within the ambit of domestic regulators. This was necessitated by the fact that non-deliverable forwards contracts in Rupee traded in foreign exchanges had a higher value and volume turnover than domestic exchanges which impacted the domestic macro-economic scenario. Following this recommendation, RBI and SEBI have framed rules for the segment in GIFT IFSC to start the process of developing the currency derivative market.

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