ICICIdirect.com launches the first-of-its-kind online trading in currency derivatives
Presently only Futures contracts in Currency Derivatives have been introduced by NSE. Hence, currently trading in Currency Derivatives through ICICIdirect will be offered in Futures contracts.
Tweet-- ICICIdirect.com, the largest online trading site in India, today announced the launch of a new product on its site called Currency Derivatives.
Introduction of this first-of-its-kind online trading in currency derivatives will enhance the suite of instruments available for trading and hedging to ICICIdirect.com customers. The strong correlation that foreign exchange has to interest rates, equity flows and commodities will translate into opportunities to trade currency futures independently or in conjunction with equities.
Presently only Futures contracts in Currency Derivatives have been introduced by NSE. Hence, currently trading in Currency Derivatives through ICICIdirect will be offered in Futures contracts.
Speaking on the occasion Mr Anup Bagchi, Executive Director, ICICI Securities Ltd said, “There is a strong need to hedge currency risk in a transparent and a low cost manner. Firstly, for the retail customer it will be one more source of diversification of an asset class, secondly active traders will benefit from the low margin requirements and hence high leverage will be a big attraction and lastly for the SME and corporates, there will be an avenue to hedge at a low cost and in a transparent manner.
From a risk management perspective for SME and corporates, there will be a trend for movements towards exchange settled trades away from OTC markets.”
Foreign exchange rates, like any other asset class move depending on various factors like demand supply, interest rate parity, trade and capital flows, speculators taking positions, clients hedging risk arising from their trade and capital flows etc.
Statistics shows a negative correlation of over 90 per cent between the INR and USD exchange rate and the Sensex. Thus equity retail customers may use it for hedging their stock market risks. For the corporates and SME, a good settlement and margining systems helps in their internal risk management and robust treasury operations.
Currency risks could be hedged mainly through forwards, futures, swaps and options. Each of these instruments has its role in managing the currency risk. The main advantage of currency futures over its closest substitute product, viz., forwards which are traded over-the-counter (OTC) lies in price transparency, elimination of counterparty credit risk and greater reach in terms of easy accessibility to all.
Currency futures are expected to bring about better price discovery and also lower transaction costs. Apart from pure hedgers, currency futures also invite arbitrageurs, speculators and noise traders who may take a bet on exchange rate movements without an underlying or an economic exposure as a motivation for trading.
“Like ICICIdirect.com has done for other products, we will back this up through nationwide customer awareness and education programs to explain the benefits and hasten the adoption to this new asset class, ” added Mr Bagchi.
Pioneers among the online trading websites, ICICIdirect.com today has 1.9 million customers. The portal provides valuable research reports covering over 170 companies and stock picks to its customers at no additional cost.
Recently, ICICIdirect.com were the first distributors to revise its commissions on mutual funds, post SEBI’s directive on removal of entry load from August 1, 2009 and waived off transaction fees for HNI Mutual Funds customers.
Four-time winner of the Outlook Money best e-brokerage award, ICICIdirect.com is one of the best trading products providers in the country.