Query on Currency derivatives trading post 04 April 2024 in view of RBI circular dated 05 Jan 2024

yeah, no chance of exit at this high premium. But also margins are shooting up. Very tough days :frowning:

Not now, premium is very high

@VenuMadhav, @mohitmehra, @Sensibull Any new word on this by RBI? For example, out of the goodness of their hearts, have they said already taken contracts will not be affected by underlying exposures and will go to expiry as they normally would?

better to exit now. By evening situation will become much worse. Margin will shoot and liquidity will completely dry. Be extremely careful

Currency doesn’t have any market maker concept to provide liquidity??

Ah no, RBI is clear. As I’d said earlier, RBI’s stance is that this has always been the case and that this is not a new regulation.

No, they don’t.

If this was “always” their stance and you being a broking house had such great knowledge. Why were you sleeping on the circulars since the last 3 months?

Will traders without exposure but with existing positions in the derivatives be allowed to square off positions till expiry? You’ve mentioned contradictory self created rules. Will you be mandatorily squaring off the positions today? Or even tomorrow?

We will not be squaring off positions. If you have exposure, you’re free to continue holding positions till expiry subsequent to maintaining sufficient margins. If you don’t have, it would be best to square off positions yourself to avoid violating RBI rules.

That’s a very confusing and unclear response again.

I’ve clearly asked the question only for traders WITHOUT exposure.

You link to the BSE circular in the notification is also broken, the main Annexure which states RBI’s directive from 1st April is creating a virus when downloading. Can you paste it here instead so we can clearly read it? Cos you’ve put it on the directive

To clarify - you will NOT be squaring off any existing trades for traders WITHOUT exposure and will be allowing exiting current positions even after the 5th? Because this is something RBI is allowing you to do?

So you’ve recommended us to square off only in the expectations that liquidity will be drying up? Just a proactive approach not a regulatory requirement?

Can i take fresh trade if i submit the declaration???I think as per the few interviews i saw on tv…this rule was applicable from 2014…but nobody really cared to see the underlying exposure…i think nothing has changed…its just that the broker house never took a declaration from the client…So it was just to get the declaration from the client incase of of any legal consequences…

I don’t know which bit of it was confusing/unclear.

Notice Number this is the BSE circular from where you can download the RBI directive.

There are two schools of thought - (1) The applicability of underlying exposure is only for positions taken after April 05 and that positions taken before can be held until expiry without being in violation of RBI circular (2) RBI’s view that this rule has always existed and clients carrying forward position into 05th or after will be in violation.

You are free to assume either and decide whether to continue holding positions if you believe in (1) or square off positions before 05th if you believe (2) and want to stay compliant.

have clarified above.

Yes, you can. However, please note that you need to give the declaration only if you have underlying exposure and are agreeing to all terms in the declaration form.

what would be the consequences / penalty / punishment for the someone who has traded in the currency in the F.Y. 2023~2024 ; without having any underlying exposure as per the RBI guidelines ? and to give the punishment to that someone ; how would the regulator come to know about such transactions ?


Hello Venu,

It will be good to have more clarity on what qualifies for an underlying exposure.

I know there is a list of 11 items which has been posted earlier, but a little more detail on each of the items will help.
For example:

  • if I have few USD cureency notes at home, do I qualify?
  • What is “undertake derivatives contract” etc.
  • What is the easiest way to have this exposure and qualify for currency trading?

I guess a separate post or a detailed video on this should help a lot of traders.


No penalty as such for last financial year for retailers, circular is gonna implement from 5th April, so if one trades with out any declaration or giving out any fake declaration may face severe consequences as these come under FEMA regulations.

To summarize, its quite clear that Zerodha will not auto square off due to RBI, but in case of margin shortfall, they will ofcourse do it (just like they would in any other position). Margins can shoot up in case of liquidity dry-up. In addition, we will have the onus of RBI rule violation and we might need to spend more energy and money in case we get any notice regarding why we had derivative positions without underlying exposure.

I will prefer to have peace of mind and close out the positions before tomorrow.


Ideally broker should not do this, RBI want to have market only for real hedgers so broker should not interfere in this. Client should give declaration after consulting their CA, if not I think it is better to avoid this segment as we never know when RBI can ask to prove the reasons for trading and these comes under FEMA ,consequences can be severe. Sometimes it is best to let it go. Also liquidity will be drastically reduced in coming days.


So it means we can’t trade as normal trader who don’t have exposure in doller terms…right?

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Yes, better to move on from this segment instead trying to give fake declaration and all and even if it is right one can only hedge it with matching cash flows, so no point.