Foreigners turning to DGCX to trade Rupee-Dollar futures contact

Indian expats in the UAE paying particular attention given exchange rate risk

Dubai, February 13, 2012: Trust Securities DMCC a specialized financial brokerage firm has announced that there has been a surge in investors' interest in trading of Indian Rupee futures.

Trust Securities a Clearing broker member of Dubai Gold & Commodities Exchange (DGCX), said the foreigners, who cannot access the Indian exchanges, have turned to the Dubai Gold and Commodity Exchange (DGCX) to trade the Rupee-Dollar futures contact. This is the only exchange outside of India where Rupee futures can be traded. The contract trades under the symbol DINR.

Trading volume at the DGCX has grown at twice the rate of world derivative exchanges with the year 2011 seeing a 110 per cent increase in volumes over the year 2010, the highest annual volume since the exchange commenced trading in November 2005 as the region's first commodity derivatives exchange. The leading derivatives exchange in the Middle East is an initiative of the Dubai Multi Commodities Centre (DMCC), Financial Technologies (India) Limited and the Multi Commodity Exchange of India Limited (MCX).  

The multi-asset broker across a broad range of listed derivatives and equity securities said the activity levels in the Rupee-Dollar futures are a major contributor to that growth having risen to over 563 per cent above 2010 levels.

Mr. Bruce Powers, Head of Research at Trust Securities, said: "Over the past eight months or so volatility in the Rupee has increased, offering better opportunities to traders and short-term investors who can take advantage of price trends. A big advantage of the futures market is that it offers opportunities to profit whether the market is trending up or down."

He said a second trading strategy being employed was called arbitrage. With arbitrage, a trader was attempting to exploit small price differentials between different Rupee futures markets. Although not yet a large portion of the volume of DGCX Rupee futures trading, it was expected to gain in popularity as activity levels continue to rise.

Given the popularity of the DGCX Rupee futures contract, the exchange launched an Indian Rupee options contract in late-September 2011. This is the only exchange traded options contract for the Rupee available outside of India. It provides investors with an instrument to hedge their futures positions, and also supports volume growth in the Rupee futures contract.

Businesses and high net worth individuals (HNWIs) are using the DGCX Rupee futures contract for hedging, speculation and arbitrage opportunities. Indian expatriates in the UAE, which is the leading trading partner of India, are paying particular attention given exchange rate risk as the UAE Dirham is pegged to the dollar. The Reserve Bank of India (RBI) has kept its benchmark interest rate at 8.5 per cent and inflation is still an issue.  

Although a majority of trading volume is not coming from hedging strategies, Rupee futures are an efficient mechanism for non-resident Indians and overseas Indian businesses to hedge currency risk. Trade occurs on a regulated transparent exchange, while contract are liquid and cost effective due to leverage. Commodity trading businesses are particularly enthusiastic about the relatively new availability of the Rupee futures contracts.

Much of the increase in volume levels in the Rupee futures contract seem to be coming from traders utilizing some form of directional trading strategies. While the local equity markets have struggled, some investors have turned to the DGCX Rupee futures contract for trading purposes, looking to profit on price volatility, the company said.

According to the Futures Industry Association, global trade of futures and options on listed derivatives exchanges rose over 25 per cent in 2010. The second most-actively traded contract of all the exchanges was the dollar-rupee contract traded on the MCX-SX derivatives exchange in India, while the third most active was the dollar-rupee contracts traded on the National Stock Exchange of India (NSE). Volume in 2010 for each tripled from 2009.

-Ends-

For further information, please contact:
Trust Securities DMCC
1402/3 - Al-Reef Tower
Jumeirah Lake Towers (JLT)
Dubai, UAE
P.O. BOX 121690
Telephone: +9714-440 5902
Fax: +971 4440 5901
Email: info@tsecurities.com  Website: www.tsecurities.com

© Press Release 2012