The Reserve Bank of India (RBI) and the Securities and Exchange Board of India (SEBI) are in advanced talks to relax norms for currency derivatives trading on stock exchanges. The goal is to boost participation, reduce unnecessary restrictions, and help diversify trading activity beyond just equities.
According to Financial Express, both regulators are planning updates that would allow more flexibility for traders and reduce compliance hurdles currently limiting market depth.
The discussions signal a broader effort by regulators to modernize India’s derivative markets and align with global practices.
Why Regulators Want These Changes
📉 1. Low participation due to strict rules
Since 2020, several restrictions—like position limits and documentary requirements—reduced activity in currency derivatives. Regulators now want to fix this.
🔄 2. Need to diversify markets beyond equities
Trading volumes in India are heavily concentrated in equities. RBI and SEBI believe a healthy market needs active currency, commodity and bond derivatives too.
💱 3. Rising volatility in INR requires better hedging tools
With the rupee facing depreciation pressures in 2025, more flexible derivative options can help businesses hedge currency risk effectively.
What Rule Changes May Come
Although the final rules are not yet released, discussions include:
✔ Easier access for retail and proprietary traders
Rules may be simplified so more traders can participate without heavy documentation.
✔ Relaxation of net-worth and position-limit norms
This would allow deeper market participation and higher liquidity.
✔ Revisions to “hedging requirement” criteria
Traders may get more freedom to take positions without proving underlying exposure, similar to global markets.
✔ Allowing more currency pairs for trading
Currently, INR trading pairs are limited. Inclusion of more global currencies may be considered.
How the Market Will Benefit
📈 Higher liquidity
More participants = better pricing, narrower spreads, and smoother trading.
🛡 Better hedging for businesses
Importers, exporters, and startups dealing in USD/EUR/GBP will get more options to manage risk.
💼 More opportunities for retail traders
Relaxed norms will encourage trading beyond equities and options.
🌍 Stronger global alignment
Rules will match global derivative standards — making Indian markets more competitive.
What Experts Say
Market analysts expect trading volumes to rise sharply if rules are eased.
They believe this could be the biggest reform in Indian derivatives since 2018, and a major step toward deeper financial markets.
