NRI trading for currency derivatives

Hi,

  1. It seems Futures and Options for currency for NRI’s is already [a thing](https://www.sebi.gov.in/legal/circulars/jun-2017/participation-of-non-resident-indians-nris-in-the-exchange-traded-currency-derivatives-etcd-segment_35187.html since Feb 2017. So when is Zerodha offering this?

  2. I have a few NRE fixed deposits in India. The USD/INR FX spot rate offered by banks to repatriate this money to my US bank is terrible. Assuming NRI’s are allowed to trade Currency Futures. Is it possible for me to get a better exchange rate by just using Futures as a vehicle to repatriate at a better exchange rate? I am assuming of course that the future contract price has favorable terms.

PS: I have even asked this question on stack exchange: https://www.reddit.com/r/investing/comments/7z9o58/logistics_of_a_usdinr_futures_trade/

1 Like

Hi @itissid,

If you see point no 3 (i) of the same circular it says:
“NRIs shall designate an Authorised DealerCategory-I bankwho is also a clearing member of the stock exchange/ clearing corporationfor the purpose of monitoring and reporting their combined positions in the OTC and ETCD segments.”

Also look at Question no 26. on the following NSE link:
https://www.nseindia.com/content/members/faq_NRI_TA.pdf:

"Can NRI trade in Currency derivative segment of the Exchange?

Ans No, Only “a person resident in India” as defined in section 2(v) of FEMA
Act 1999 are allowed to participate in currency derivative segment of the
Exchange."

Zerodha will not be providing this as per the circular you have referred to.

Thanks,
Lindo

1 Like

@lindo Thanks for your response. So first off

The reference for Q 26 “Can NRI trade in Currency derivative segment of the Exchange?”: https://www.nseindia.com/content/members/faq_NRI_TA.pdf seems to reference really old circulars pre 2010.

Secondly for: “NRIs shall designate an Authorised DealerCategory-I bankwho is also a clearing member of the stock exchange/ clearing corporationfor the purpose of monitoring and reporting their combined positions in the OTC and ETCD segments.”

Members are listed: https://www.nseindia.com/products/content/derivatives/curr_der/clearing_banks.htm
My question is can’t zerodha be a member among this list to do such trades?

Hi @itissid,

If you notice the 13 listed entities in that list all of them are scheduled commercial banks in India, what this means is essentially to even be on that list Zerodha will have to get a banking licence in India. And this is not a simple process, if it were the Ambani’s would have opened a bank before launching Jio!!

Hope this helps.
Lindo

Thanks for the reply!

Here is a thought. I may be out of my depth to suggest this, but has Zerodha considered partnering with one of these banks to enable such trades?

These banks must have some sort of API to facilitate trading on the exchange. It is not of course trivial to implement such a system for you, but perhaps worth at least thinking about by folks in charge…

Hi @itissid,

1: Banks will never think of tying up with a broker for this as such an option would lead to loss of potential revenue in terms of brokerage for them

2: Banks in India would not consider giving out API s for this considering the financial risks involved.

The only solution is if the exchange allows for other category of players apart from AD1 category banks to enter this sector.

Thanks,
Lindo