 What is currency trading?
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While trade is international, currencies
are national. As international transactions are settled in global currencies, usually
they are bought / sold for one another and this constitutes 'currency trading'.
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Why Exchange Traded
Currency Derivatives?
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- Broader participation
- Efficient risk management systems
- Provide transparent trading platform
- Efficiency in price discovery
- Eliminate counterparty credit risk
- Provide access to all types of market participants
- Offer standardized products & settlement cycles
- Small order up to 1 contract or 1000 USD can be executed
- Underlying exposure is not mandatory
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What are the advantages
of trading with SATCO?
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- SATCO Is the India’s First Financial Service to offer currency trading on internet
trading platform.
- SATCO. Brings to you state–of-the-art trading services.
- It offers you safe, transparent and easy ways to trade
- It offers a bevy of incomparable advantages which make the experience of trading
online swift, efficient and pleasant.
- SATCO offers you an added advantage to enjoy the reach of our distribution network
all over India .
- Every investor is unique and no two participants follow the same investment pattern.
SATCO provides thorough and unbiased research to help participants take informed
decisions. With daily, weekly and monthly newsletters and intraday recommendations
on SMS, you will truly benefit from our research expertise.
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What are Exchange
Traded Currency Futures?
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- Are standard contracts of a specified quantity
- To exchange one currency for another
- At a specified date in the future called settlement date
- At a price that is fixed on the purchase date called futures price
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What is currency futures
contract? |
A currency futures contract is standardized version of forward contract that is
traded on a regulated exchange. It is an agreement to buy or sell a specified quantity
of an underlying currency on a specified date in the future at specified rate. (USD1
= INR 48.00).
Note: USD is abbreviation for the US Dollar and INR for the Indian Rupee)
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What is OTC Market?
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OTC is the abbreviation of ‘Over the Counter’. It has no central marketplace and
is linked to a network of dealers / traders who do not physically meet but instead
communicate through a network of phone calls & via computers. OTC contracts are
typically customized based on negotiations between counter parties. The counter
party default risk depends on the counter party credit-worthiness and other factors.
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Who can participate
in currency futures market?
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Any resident Indian or company including banks and financial institutions can participate
in the futures market. However, at present, Foreign Institutional Investors (FIIs)
and Non Resident Indians (NRIs) are not permitted to participate in the currency
futures market. Participants in the Currency Derivative Segment can be classified
in to three broad categories:
(A) Hedgers
Given the recent geopolitical uncertainties, the foreign currency markets have been
in turmoil. What little returns that can be achieved need protection by locking
in your exchange rate for your exposure through currency futures. The Businessmen
and investing public are increasingly exposed to global markets and the issue of
protecting against foreign exchange risk becomes critical. Business Houses, Entrepreneurs
and individuals who can benefit from hedging through Currency Futures:
- Exporters, Importers & Money Changers
- Individuals / HNI’s investors
- Borrower, FCY Loans, Corporate
- Commodity, Jewelers, Diamond & Bullion Traders
- Petroleum Product Traders
- Banks & Financial Institutions
- Professionals receiving remuneration in foreign currency
- Investors investing in assets exposed to currency risk
(B) View Based Traders
Currency futures provide investors / traders an efficient platform to observe the
movement of local currency (INR) against other currency (USD) and trade.
(C) Arbitragers
Currency Futures provides opportunity for Arbitrage Trading by taking advantage
of price difference of the same or similar product between two or more markets by
striking a combination of matching deals and capitalize upon the imbalance without
any additional market risk.
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Can currency futures
help small traders? |
Yes. Minimum size of USD / INR futures contract is USD 1000. This is well within
the reach of small traders. All transactions on the exchange are anonymous and are
executed on a price-time priority ensuing that the best price is available to all
the categories of market participants irrespective of their size. Also since the
profits / losses in futures market are collected / paid on a daily basis, the scope
of losses for participants gets limited.
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I do not have any
exposure to foreign exchange risks. Does a currency futures exchange mean
anything to me? |
Yes, it does if you want to invest purely as an investor. You can benefit from the
exchange rate fluctuations just as you can benefit by investing in equities in the
stock market. However, as in stock markets, you can also stand to lose money if
price movements are not keeping with what you had anticipated. Participating in
currency futures exchange is risky, just as the stock market is. You should therefore
be knowledgeable about the currency market if you want to participate as an investor.
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How do exchange traded
currency futures enable hedging against currency risk?
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On a currency exchange platform you can buy or sell currency futures. If you are
an importer you can buy futures to 'lock in' a price for your purchase of actual
foreign currency at a future date. You thus avoid exchange rate risk that you would
otherwise have faced. On other hand if you are an exporter, you sell currency futures
on the exchange platform and 'lock in' a sale price at a future date.
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What are the risks
involved in the currency futures market?
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Risk in currency futures pertain to movements in the currency exchange rate. There
is no rule to determine whether the currency rate will rise or fall or remain unchanged.
A judgment on this is the domain of experts with deep knowledge and understanding
of the variables that affect currency rates.
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What are the factors
that affect the exchange rate of currency?
India? |
A country’s exchange rate is typically affected by the supply and demand for the
country’s currency in the international foreign exchange market. The demand and
supply dynamics is principally influenced by the factors like interest rates, inflation,
trade balance and political and economic scenarios in the country. The level of
confidence in the economy of a particular country also influences the currency of
that country.
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What are the contract
specifications for currency futures?
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Presently only USD / INR are available for trading.
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How do I start trading
at SATCO?
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Firstly, you should be having a PAN Number (This is allotted by Income Tax Department,
Government of India). It has been made mandatory by SEBI (Security & Exchange Board
of India), for all person/s who transacted on any stock exchange to have a PAN Number.
Secondly, you have to register as a client with SATCO. We have a separate Registration
form for the Currency Segment which is required to be filled up.
Read the instructions on the Registration form carefully, fill up all the required
fields and make sure you attach the required supporting documents. Failure to do
so may lead to your application being rejected.
The process of Registration and activation of your account will be completed in
around 7 days from the day we receive the registration form duly completed in all
respect along with all your documents.
After an initial deposit has been paid in by you, we will update our database and
activate your ID. You shall receive a Welcome communication sent by us through courier.
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I am an existing client
of SATCO, can I immediately start trading in Currency at SATCO?
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Yes, you will have to complete the registration for the currency derivatives segment.
We have a separate Registration form for the Currency Segment which is required
to be filled up. The process of Registration and activation of your account will
be completed in around 7 days from the day we receive the registration form duly
completed in all respect along with all your documents.
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Is physical delivery
compulsory?
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No, delivery is optional. It is only when the seller puts in the intention to deliver
that delivery takes place. Otherwise all contracts are cash settled or contracts
are pre-specified about delivery nature for a particular Commodity.
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What is the delivery
procedure?
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The details of delivery procedure
for each commodity are available with the contract specifications of each commodity.
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What is Futures Contract?
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A derivative instrument, Futures
is a type of forward contract. Futures are contracts to sell / buy standardized
financial instruments or commodities on a specified future date at an agreed price.
Futures contracts are used generally for protecting against adverse price fluctuation.
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How is Future Prices
Determined?
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Futures prices evolve from the
interaction of bids and offers emanating from all over the country – which converge
in the trading floor or the trading engine.
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What are Margins?
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The aim of margin money is to minimize
the risk of default by either counter party. The Exchanges fix rates of ordinary
/ initial margin keeping in view need to balance high security of contract and low
cost of entering into contract.
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What is the difference
between Equity Futures and Commodity Futures?
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In equity futures the underlying
asset is the equity share of any company whereas in commodity futures the underlying
asset is the commodity itself.
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What are the charges
to trade in Commodity Futures?
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As of today, the charges to trade
in Commodity Futures include Stamp Duty, Turn Over Charges and Service Tax.
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Is options trading
in commodities allowed?
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No, options trading in commodities
are not allowed yet but in future it might be introduced.
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How would the contracts
be settled??
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All open contracts not intended
for delivery and non deliverable positions at client level would be cash settled.
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Can one short sell
the commodity without having physical goods / holdings in their Demat account?
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Yes, as this is the Derivatives
contract, you can short sell without having possession of that commodity.
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Is there any limit
to which price of a commodity can rise or fall in a day?
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Yes, there are circuit limits or
daily price range (DPR) to safeguard the interests of general investors from the
extreme volatilities in markets for preventing any unexpected fall or rise beyond
a limit.
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Is there any limit
to the quantity I can trade / hold in any given commodity at any point of time?
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Yes, there is a maximum permissible
limit on holding a particular commodity for client as well as member. It varies
from commodity to commodity and exchange to exchange.
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Will I receive trade
confirmation?
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Yes, you will receive contract
notes for your trades. Further, your dealer / relationship manager will update you
accordingly.
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How do I know which
quality is being traded in futures as Commodities have many qualities?
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The quality specification of each
commodity is mentioned in the contract before it is launched, so it is always advisable
to go through the details as given by exchanges.
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Is Sales Tax applicable
on all trades?
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If the trade is squared off sales
tax is not applicable. Sales tax is applicable only if a trade results into delivery
for the seller.
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What is collateral?
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In case of broking business, collateral
is any permissible financial instrument pledged as a guarantee for margin requirements.
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Can I trade in international
exchanges?
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FMC does not allow trading in the
International Exchanges hence we are not providing this service as of now. As and
when the regulators permit we will provide the servic
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What is a spread position?
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Going long and short consecutively
in two different contracts of the same commodity is known as a spread position.
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What is tick size?
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Gold has tick size of Rs. 1 this
means you have to increase / decrease the bid / ask price by at least Rs. 1. Hence,
the minimum price movement of any contract is known as the tick size.
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I do not want to give/take
physical Delivery; will I be allowed to Trade in commodities?
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Yes, you can trade in commodities
even without having obligation/liability of give/take physical delivery. The only
condition is that that you will have to Square off your trade before the Expiry
of the contract.
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