The RBI and Sebi moved rather quickly on the introduction of currency futures in August 2008 for one currency pair, followed by more currency pairs in late 2009. The move has admittedly helped the undernourished Indian financial markets in a big way. But are exchange traded futures the answer to preventing systemic risks in the future?

In the last month of 2009, the exchange traded currency derivatives market in India witnessed an increased flurry of activity, thanks to the RBI's decision to extend the currency futures market to include three more currency pairs. It appears that currency options, as natural extensions of the currency futures market, are also on the anvil.

In a country with more committees, reports and policy papers than actual implementation on the ground, the RBI and Sebi should be given credit for having moved rather quickly on the currency derivatives front. Some analysts describe this welcome, though belated, move as a response to the lessons learned from the global financial crisis, while an alternate viewpoint ascribes to it the motive of (at least partially) blocking the efforts to use OTC derivatives for speculation on currency movements.

The Analyst Magazine, Currency Futures, Currency Derivatives Market, Global Financial Crisis, Indian Financial Markets, OTC Transactions, Futures Markets, Retail Investors, Financial System, Financial Risk, Risk Management, Financial Resources.