BFX EURUSD Futures
The global currency market (commonly referred to as the Foreign Exchange markets or the FX markets) is the largest asset class in the world in terms of value of transactions. The average daily turnover across all FX markets worldwide increased to USD 4.15 trillion in 2010, as compared to USD 3.40 trillion in 2007. The spot market transactions (USD 1.49 trillion), outright forwards (USD 0.475 trillion) and FX swaps (USD 1.765 trillion) constitute over 93% (USD 3.73 trillion) of the global FX markets' average daily turnover(Source: BIS).
The FX markets can be broadly classified into the Over-the-Counter markets (OTC) and the exchange markets. The OTC market refers to the cash, spot, forward contracts, swaps and other financial instruments (derivatives such as options, currency swaps, etc.) that are customised and transacted directly between two or more counterparties (outside the exchange environment). Alternatively, currency futures contracts are traded on exchange platforms, such as the BFX. The BFX Clearing and Depository Corporation (BCDC) ensures the outstanding profits and losses (referred to as the mark-to-market profits and losses or MTM) are settled on the following business day (T+1 day basis). Novation reduces the risk of default for the market participants. The price discovery in an electronic exchange trading platform is more effective, thereby providing efficient risk management for market participants. Exchange markets also provide a smaller futures contract lot-size enabling the micro, small and medium scale enterprises to mitigate currency price risk.
According to a report published by the Futures Industry Association (Mar 2011), the growth rate of the currency futures and options trading on the leading global exchange markets has increased by 142% in 2010 (2.40 billion contracts) as compared to the same period in 2009 (0.99 billion contracts). The increasing volatility in the FX markets since 2008, due to the global economic recession, has resulted in greater risk for market participants. Exchange markets provide an ideal platform for risk mitigation.
In the initial phase, the BFX is scheduled to launch the futures contracts on the Euro US dollar (EURUSD) currency pair.The Euro versus the US dollar futures contracts is the largest traded currency futures contract in the world (in terms of the value of transactions). The Euro is the second most traded currency in the world after the US dollar and is the common currency of the Euro zone region. The EURUSD is the barometer for the indication of the strength of the US dollar and has a huge impact on the value of global commodity prices. When the EURUSD exchange rate decreases, it implies that the Euro has depreciated and the US dollar has appreciated, and vice versa when the EURUSD exchange rate increases. With the Euro zone countries contributing to one-fifth (over USD 12 trillion) of the global GDP, the Euro currency has gained recognition in terms of acceptance for international trade. Increasing volatility in the EURUSD exchange rate has necessitated exporters, importers and banks to hedge against currency risk using futures contracts, where the transaction costs are much lower as compared to the OTC markets.
The BFX EURUSD currency futures contract has a lot size of EUR 25,000 and is quoted in US dollars and cents per one Euro. The final settlement price is based on EURUSD futures contracts trading in Chicago, USA.
For more information on the BFX EURUSD Futures product booklet, please click here
For more information on the BFX EURUSD Futures contract specifications, please click here
BFX USDINR Index Futures
The US dollar versus the Indian Rupee (USD-INR) currency pair has emerged as one of the most volatile Asian currencies. The spot USD-INR currency increased from a low of 44.64 in January 2011 to a high of 57.3275 by June 2012 (an increase of 28.42%) before retracing to 51.39 in October 2012. The depreciation of the Indian Rupee was accentuated due to high trade deficit (US$ 185 billion for FY 2011-12) leading to increasing demand for the US dollars from importers in India. Market participants such as importers, exporters, traders, jewellers and investors based in India and around the world having exposure to the USD-INR currency pair can mitigate price risk by hedging using exchange-traded currency futures.
It is in this perspective that the BFX has launched a unique product - the BFX USDINR Index Futures - which is first of its kind in the world. Hedgers, investors and arbitrageurs can immensely benefit by trading on the BFX USDINR Index Futures. The BFX USDINR Index Futures won the "Most Innovative Forex Product" award at the Jordan Forex Expo 2012.
As on 11th January, 2013, the cumulative trading volume on the BFX USDINR Index Futures (BFXUSIN) and the BFX USDINR Index Mini Futures (BFXUSINM) has crossed 2.63 million contracts with trading turnover of US $36.87 billion (single-side).
Benefits of Trading on the BFX USDINR Index Futures
- Innovative Index Futures contract with MTM directly calculated in US dollars.
- Tracks the corresponding USDINR Currency Futures prices traded on the Indian markets - same contract maturity date.
- Final settlement price is the RBI reference rate for the spot USDINR currency.
- Narrow bid-ask spread (as low as 1 tick) as compared to the OTC NDF market.
- Smaller contract size equivalent approximately to US$ 55,000 (at USDINR rates as on 10th January 2013).
For more information on the BFX USDINR Index Futures product booklet, please click here
For more information on the BFX USDINR Index Futures contract specifications, please click here
BFX USDINR Index Mini Futures
For the benefit of the retail investors, smaller traders and SME segment, the BFX USDINR Index Mini Futures was launched on 28th September 2012. The BFX USDINR Index Mini Futures has a contract size of US$ 100 x Index Points (for e.g. US$ 100 x 53.1575 = US$ 5,315.75), which is one-tenth the size of the larger contract. The BFX USDINR Index Mini Futures is expected to benefit a wider spectrum of market participants who have exposure to the US dollar versus the Indian Rupee currency pair in the international markets.
Benefits of Trading on the BFX USDINR Index Mini Futures
- Smaller contract size equivalent approx. to US$ 5,400 (as on 10th January 2013).
- Retail investors, smaller traders, SME companies can immensely benefit due to smaller contract size.
- Low minimum initial margin of 2% (approx. US$ 110 per contract).
- Prices aligned with international reference markets - the final settlement price is the RBI reference rate for the spot USDINR currency pair.
- Innovative Index Futures - easy to calculate mark-to-market (MTM) directly in US dollars.
- Narrow bid-ask spread decreases transaction costs.
For more information on the BFX USDINR Index Mini Futures product booklet, please click here
For more information on the BFX USDINR Index Mini Futures contract specifications, please click here
BFX INRUSD Futures
The BFX Indian Rupee versus the US dollar (INR-USD) Futures (Symbol: BFXINUS) is based on the inverse of the USD-INR currency pair quoted in US dollars and cents per INR 10,000. With a contract value of INR 1,000,000 (approximately equivalent to USD 18,300 as on January 15, 2013), the BFX INRUSD Futures effectively complements the BFX USDINR Index Futures (BFXUSIN) and the BFX USDINR Index Mini Futures (BFXUSINM).
Note: BFXUSIN and BFXUSINM have contract values of approx. USD 55,000 and USD 5,500 respectively (as on Jan 10, 2013). Thus, the contract value of the BFX INRUSD Futures at approx. USD 18,000 facilitates market participants with an alternative futures contract to trade on the USDINR currency pair.
Benefits of Trading on the BFX INRUSD Futures
- Effective and efficient fixed currency hedge on the USD-INR currency pair.
- Insurance against adverse currency price volatility.
- Direct cash settlement in US dollars minimizes currency conversion risk.
- Excellent Investment and Arbitrage opportunities.
- Alignment of BFX INRUSD futures prices with the Indian currency futures markets due to the final settlement price based on the Reserve Bank of India (RBI) official spot reference exchange rate for USDINR currency pair.
- Retail and Institutional participation due to small contract size of INR 1,000,000.
- Low impact cost due to narrow bid-ask spread.
For more information on the BFX INRUSD Futures product booklet, please click here
For more information on the BFX INRUSD Futures contract specifications, please click here