The Multi Commodity Exchange of India (MCX) is ready to launch its first currency options after receiving approval from market watchdogs Reserve Bank of India and Securities and Exchange Board of India.
The new option contracts will be tied to dollar-rupee (USD-INR) spot currency pairings expanding the MCX currency derivative segment product line which until now provided only trading in currency futures.
"Introduction of this product completes the spectrum of hedging instruments available on the MCX-SX currency segment and adds further efficiency to the risk mitigation mechanism in USD-INR," MCX-SX MD and CEO, Joseph Massey, told local media.
Massey added that the new currency options offered advantages in greater flexibility in hedging as opposed to delta one products.
Demand for currency hedging solutions has increased as recent spikes in the rupee's volatility have exposed the country's vulnerability to foreign capital flows. The rupee has fallen as much as 9% this year, recovering slightly in recent weeks.
The exchange announced that it had successfully conducted mock-trading for the currency options on 4 August and will announce a date for their debut in live trading.
MCX is the country's largest commodity exchange with 751 trading members and around 44% market share in currency futures trading as of the last fiscal year, buoyed by steady growth in currency futures turnover and open interest. It serves the interest of financial institutions, importers, exporters and individuals as well as those involved in cross-country FX transactions.
For more, click here.