04 April 2024 – According to Nithin Kamath, the founder of Zerodha, the Reserve Bank of India’s (RBI) limits on unhedged currency options might hurt currency derivative trading and put stock brokers in the greatest danger.
“I’ve talked about this before, but the biggest risk for stock brokers is the rules made by the government,” said Kamath. “The RBI might have its reasons for making these new rules, but it could mean the end of currency trading for regular traders on stock exchanges,” he said.
In a January 5 circular, the RBI said that traders must demonstrate that they have a contract or strategy in place to handle fluctuations in currency value as of April 5 to participate in currency markets managed by exchanges such as the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE).
Conclusion
These new regulations require a trader to designate a special person or dealer if their exposure exceeds $100 million (the contract value, not real money). However, traders who have lower exposures need to declare that they are trading in order to hedge against currency fluctuations.
