ProductsCurrency Derivatives

What are exchange traded currency derivatives?

Exchange traded currency derivatives are financial contracts that allow traders and investors to speculate on the future price movements of various currency pairs. These derivatives are traded on exchanges, and their value is based on the underlying currency exchange rate.

Advantages of currency derivatives:

• Hedging : Currency derivatives can help corporate manage their currency risk by hedging against adverse movements in exchange rates.
• Speculation : Currency derivatives also offer the potential for traders to profit from anticipated movements in exchange rates.
• Liquidity : The exchange traded currency derivatives market is highly liquid, which means traders can easily buy and sell contracts at any time during market hours.
• Transparency : Exchange traded currency derivatives provide a transparent price discovery mechanism as prices are quoted in real-time and publicly available.
• Flexibility : Traders have the flexibility to trade currency derivatives across various expiries like weekly, monthly.
• Margins : Currency Derivatives have lower margin requirements compared to other derivative products. At present margins are around 3% - 5%.
• Cost : Currency Derivatives are comparatively cheaper to trade than other derivative products. STT is not applicable on currency derivatives. Also exchange transaction charges low compared to other products.

Currency Pairs Traded in India