Honourable
Finance Minister, Chairman SEBI Shri Bhave, Chairman NSE, Shri Mathur, MD &
CEO NSE, Shri Ravi Narain, DMD, NSE Smt. Chitra Ramakrishnan, ladies and gentlemen.
2. We are gathered here
to mark an event of great significance in the context of Indian financial markets.
This event is in fulfillment of the announcement made by the Hon. Finance Minister
as part of the Budget Speech in February 2008. It may be recalled that the preparatory
work in this regard had commenced with the setting up of an Internal Group on
Currency Futures in RBI as announced in the Annual Policy, April 2007. Today is
the culmination of a process of extensive consultations and deliberations intended
to design a framework for introduction of currency futures in conjunction with
the existing vibrant OTC market. 3.
Let me say a few words on the impressive growth of forex markets in India in the
recent past. As per the BIS Triennial Survey on the global foreign exchange and
derivatives market activity (2007), the foreign exchange market in India has grown
into the 16th largest market in the world in terms of total daily turnover which
was US$34 billion in 2007. The OTC derivatives segment of the foreign exchange
market has also increased significantly to register a daily average turnover of
USD 24 billion, which is 17th largest among all countries. The daily turnover
has increased to US$48 billion in 2007-08. The bid-offer spreads are narrow reflecting
the liquidity and efficiency of the market. There is a wide menu of products available
in the OTC market which serves a distinct economic purpose. 4.
The biggest challenge in designing a framework for currency futures in India,
I may say, was the contextual setting in which the foreign exchange market operates
in India. There was no ready template available internationally that we could
draw upon since most of the countries that have active currency futures markets
are those which are relatively more convertible on the capital account. The endeavour
was to have a framework which genuinely sought to provide an additional avenue
for risk management while maintaining the integrity of the existing market microstructure.
5. The Report of the
Internal Group was discussed extensively in the meetings of the Technical Advisory
Committee on financial markets which consists of market participants, experts
and regulators. We have also had the benefit of an array of expert views, including
those of the Ministry of Finance which were indeed valuable in giving final contours
to the framework. The operational aspects were commendably dealt with by the RBI-SEBI
Standing Technical Committee and I must highlight the exemplary inter-regulatory
coordinative approach that has been the hallmark of the entire process. A similar
approach is now being adopted in respect of interest rate futures as well and
we may see a fruition of efforts in this regard in a short time. In this regard,
I express deep appreciation of the contribution made by SEBI, and in particularly
the Chairman, in bringing this to fruition. 6.
I congratulate NSE for putting in place the platform in a short time and ensuring
a sizeable number of members at the initial start itself. I believe the currency
futures market will seamlessly complement the existing OTC market. As you may
be aware, in all countries, including developed markets, OTC segment dominates
foreign exchange transactions. 7.
The introduction of currency futures, I am sure, will provide further depth and
breadth to the market and fulfill their intended objective as an effective risk
management instrument. I would also like to take this opportunity to urge all
the market participants to leverage this significant milestone for skill development
within as well as at a broader industry level. 8.
On behalf of RBI, I would like to assure our continued commitment to orderly and
well thought out development of financial markets, while maintaining financial
stability and integrity. |