With an aim to help in government efforts to stem fall in rupee value, Sebi has tightened the exposure norms for currency derivatives to check large scale speculations in the market.
The decision was taken in consultation with banking regulator RBI late last night by Sebi, which regulates the entire gamut of capital markets, including trading in currency derivatives.
Currency derivative trading allows traders and investors to take forward views on various currency pairs, including rupee-dollar, and it was being felt that large-scale speculations on their future movements might be adding to the downward pressure on the Indian currency, which fell to a record below 61 level against the US greenback yesterday.
Sebi said in a circular that it is reducing the exposure that brokers and their clients can take on currency derivatives and also doubled their margins on dollar-rupee contracts.
The exposure to all currency contracts for a broker has been capped at 15 per cent of their overall exposure or USD 50 million, whichever is lower.
For clients, this cap would be 6 per cent, or USD 10 million, whichever is lower.
Sebi said that the new norms would be applicable with effect from July 11 and the changes have been decided in consultation with RBI "in the view of recent turbulent phase of extreme volatility in USD-INR exchange rate.
The current exposure limits for brokers and clients were the higher amounts of 15 per cent of their overall exposure or USD 50 million, and 6 per cent or USD 10 million, respectively.
The margin requirements are different across various categories and they are being increased by 100 per cent of the present rates for rupee-dollar derivative contracts.