Back in the history - on August 29, 2008, the National Stock Exchange of India (NSE) introduced a new asset class of Currency to its Exchange Traded Derivatives Segment. This marked a significant moment as they launched Futures based on the currency spot rate between the US Dollar and Indian Rupee. The first trading day saw active participation, with 65,798 contracts worth ₹291 crores being traded by over 150 members, including banks.
Exchange Traded Currency Derivatives have proven valuable for various market participants seeking competitive FX pricing and effective price discovery for managing currency exposures. The presence of a clearing corporation has mitigated counterparty credit risk, and daily settlement of mark to market obligations has reduced the risk of accruing substantial losses.
Over the course of 15 years, the NSE’s currency derivatives platform has facilitated the trading of nearly 20 billion contracts valued at ₹609 trillion. In the last decade alone, the volume of contracts traded has surged sevenfold, from a daily average of 2.7 million contracts in FY14 to 19.2 million contracts in FY23. During this period, the turnover has also grown significantly, increasing by 3.4 times, from a daily average turnover of ₹120 billion in FY14 to ₹414 billion in FY23.
Presently, NSE provides currency futures and options for seven currency pairs, encompassing four Indian Rupee pairs (USDINR, EURINR, JPYINR, GBPINR) and three USD pairs (EURUSD, GBPUSD, USDJPY). The platform has seen the involvement of over 425 trading members, including banks, as well as around 4.7 lakh clients. While the USDINR currency pair continues to be the most traded currency on the exchange, its contribution to total turnover has dipped below 80% in the current fiscal year.
Note that NSE’s USDINR Futures and Options contracts have earned global recognition. They hold the distinction of being the largest contracts in their respective categories based on the number of contracts traded in the calendar year 2022. These statistics were published by the Futures Industry Association (FIA), a prominent derivatives trade body.