SEBI Raises Currency Derivative Limit to $5 Million

The Securities and Exchange Board of India revised currency derivative norms on Thursday, increasing the threshold for domestic and foreign portfolio investors to hold positions without establishing an underlying exposure. The new limit allows for positions up to $5 million in currency derivative contracts, a move that aligns the regulator's framework with a Reserve Bank of India circular issued on October 10.

This $5 million cap applies to the combined notional value of long or short positions across all rupee-involved currency pairs on recognized stock exchanges. While domestic clients may exceed this limit provided they meet risk management conditions set by the central bank, foreign portfolio investors face stricter constraints. Specifically, foreign investors are capped at $5 million for short positions, and any long positions exceeding that amount require the investor to hold underlying exposure in Indian equity or debt securities.

To finalize the transition, the regulator has directed all clearing corporations and stock exchanges to update their internal systems and regulations to implement these new provisions.