Brokers reopen doors to FX derivatives as dust settles

livemint.com:

Zerodha, Motilal Oswal and Kotak Securities have begun seeking self-declarations from clients stating that such positions are taken only against unhedged exposure within the $100 million limit across all foreign exchange contracts stipulated by the Reserve Bank of India (RBI). On 5 January, the RBI said while users could take exchange-traded currency derivatives (ETCD) positions in dollar, yen, euro and pound with rupee as the other pair up to $100 million across all recognized exchanges, without having to establish underlying exposure, the exchanges must inform them that they should be able to establish the existence of a valid underlying exposure which has not been hedged.

Following this, brokers closed out retail client positions in ETCD to ensure that none fell foul of the Foreign Exchange Management (Foreign Exchange Derivatives Contracts) Regulations, 2000. The self-declaration for clients of Zerodha, among the largest stock market brokers in India, reads: "Traders acknowledge to have previously engaged in ETCD through Zerodha and intend to continue doing so; to maintain their position limit within $100 million; have underlying exposure which is not hedged in accordance with the RBI directive; upon request by Zerodha, the relevant exchanges (NSE & BSE), or the RBI, provide sufficient evidence of the underlying exposure related to ETCD contracts and furnish the same promptly, if required; and indemnify and hold Zerodha harmless from “any liabilities, losses, damages or costs that may arise in the event the Trader is unable to produce the required evidence...." Mint has seen a copy of the form, to be signed by traders.