| Coccinielo: the rupee options market is "going to get very deep and more liquid" |
Rupee currency options have started trading for the first time under new guidelines from the Reserve Bank of India. The move comes as part of a series of efforts to develop Indian derivatives markets.
Nine market-makers - five local and four foreign - are permitted to sell the instruments. But hedge funds need not get too excited - the new products have been tailored to serve as a useful hedge against risk for local corporates rather than as a speculative tool.
As Ravi Savur, head of structured products at market-maker Citigroup in Mumbai, explains: "The central bank has taken the view that local corporations should be allowed to be globally competitive. They should be allowed to manage risk in the same way as other companies overseas do." One year and many consultative committee meetings later, the new cautious but effective options product was launched on the market.
Until options started trading on July 7, the only rupee hedging tools available to Indian corporates were forward contracts.