Product Specification of Currency markets in India | Foreign Exchange Tutorials

Product Specification of Currency markets in India

The product specifications of the currency markets in India include the following:

Currency pairs: The Indian currency market trades in a range of currency pairs, including USD/INR, EUR/INR, GBP/INR, JPY/INR, and others. The USD/INR pair is the most actively traded currency pair in the market.
Spot market: The spot market is where currencies are bought and sold for immediate delivery. The settlement period for spot transactions in the Indian currency market is two working days from the date of the transaction.
Derivatives market: The derivatives market in India includes currency futures and options contracts. Currency futures are standardized contracts that specify the quantity, delivery date, and price of the underlying currency. Currency options, on the other hand, give the holder the right, but not the obligation, to buy or sell a currency at a specified price on or before a specified date.
Contract size: The contract size for currency futures contracts in the Indian currency market is USD 1,000, while the contract size for currency options contracts is USD 1,000 or its multiples.
Trading hours: The Indian currency market operates in two trading sessions: the morning session and the evening session. The trading hours for the morning session are from 9:00 am to 5:00 pm, while the trading hours for the evening session are from 5:00 pm to 7:30 pm.
Margin requirements: Traders in the Indian currency market are required to maintain margin accounts with their brokers. The margin requirement for currency futures contracts is typically around 4% to 5% of the contract value, while the margin requirement for currency options contracts is typically around 3% to 5% of the premium.
Settlement: Currency futures contracts in the Indian currency market are settled in cash, while currency options contracts can be settled in cash or through physical delivery of the underlying currency.

Overall, the product specifications of the currency markets in India are designed to provide traders with a range of options to trade in the market, while also ensuring that trading is conducted in a transparent and regulated manner.

Practice Questions

1. What is the most actively traded currency pair in the Indian currency market?
A) USD/EUR
B) USD/JPY
C) USD/GBP
D) USD/INR
Answer: D

2. What is the settlement period for spot transactions in the Indian currency market?
A) One working day
B) Two working days
C) Three working days
D) Four working days
Answer: B

3. What are the two types of derivatives contracts traded in the Indian currency market?
A) Options and swaps
B) Futures and swaps
C) Futures and options
D) Forwards and options
Answer: C

4. What is the contract size for currency futures contracts in the Indian currency market?
A) USD 100
B) USD 500
C) USD 1,000
D) USD 10,000
Answer: C

5. What are the trading hours for the evening session in the Indian currency market?
A) 9:00 am to 5:00 pm
B) 5:00 pm to 7:30 pm
C) 7:30 pm to 10:00 pm
D) 10:00 pm to 12:00 am
Answer: B