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About ICCL

Indian Clearing Corporation Limited ("ICCL") has been promoted by BSE limited ("BSE") as its 100% ownedsubsidiary company, inter alia, to function as a Clearing Corporation. At present, ICCL undertakes clearingand settlement services for the Mutual Funds Segment and Corporate Debt Segment of BSE. ICCL alsoundertakes clearing & settlement functions of the Currency Derivatives Segment of United Stock Exchange

of India Limited ("USE")

Clearing and Settlement for USEs Currency Derivatives Segment(USE CDX) through ICCL

ICCL also undertakes Clearing and Settlement and Risk Management Activities for USEs CurrencyDerivatives Segment. The activities, inter alia, include computation and collection of mark to marketsettlement amount from Clearing Members, Risk Management i.e. computation and collection of varioustypes of margins from its Clearing Members, management of collateral deposits of Clearing Members etc. asmay be prescribed by ICCL/USE from time to time.

Process

Daily Mark to Marketsettlement.

The daily mark-to-market to be settled in cash on T+1 day basis.

Settlement mechanism Cash settled in Indian rupees.

Settlement priceThe settlement price is the Reserve Bank of India Reference Rate on thedate of expiry.

Last Trading DayThe near month contract is discontinued for trading 2 days prior to theexpiry day (assuming both the days are trading days).

Final settlement dayThe final settlement day is the contract expiry date which is generally theT+2 day from the last trading day of the contract.

Clearing MembersTypes of Clearing Members

Trading-Cum-Clearing Member (TCM)

A TCM can trade as well as clear & settle own/cliental trades. In addition, a TCM can also clear &

settle trades of his associate Trading Members.

Professional Clearing Member : (PCM)

A PCM doesnt have trading rights. A PCM has only clearing & settlement rights i.e. he just clears &

settles trades of his associate Trading Members & clients.

Clearing Banks for ICCL USE Currency Derivatives Segment.

ICCL has empanelled following nine Clearing Banks for the purpose of settlement of funds obligations byClearing Members in ICCL-USE Seg. A Clearing Member needs to open settlement account with any one ofthe below mentioned designated Clearing Banks for the purpose of settlement of funds obligation.

Sr.No Name of Clearing Bank

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Procedure for deposit of liquid assets for the Currency Derivatives Segment:

Cash Deposit

For depositing cash as liquid assets the Clearing Members need to give instructions to their

respective Clearing Banks to transfer the amount to the designated settlement account of ICCL for

enhancement of cash collateral. Fixed Deposit Receipts (FDRs)

The FDR(s) of a scheduled commercial bank can be deposited by the Clearing Members towards

liquid assets. The FDRs deposited by the Clearing Members should be issued in favour of Indian

Clearing Corporation Ltd. a/c Trade Name of the Clearing Member" and should be duly

discharged by the Clearing Member himself or an authorized signatory of the member on the

reverse of the FDRs. A clearing member needs to submit the FDR alongwith a letter (in the

prescribed format) of the concerned bank addressed to ICCL.

Bank Guarantee(s)

The bank guarantees towards liquid assets should be of a scheduled commercial bank and should

have a minimum validity period of three months. The bank guarantees should be strictly as per theprescribed format as given on BSEs website www.bseindia.com.

The bank guarantees need to be submitted alongwith a covering letter as per the prescribed format

to ICCL.

In case of renewal, the renewed Bank Guarantee should be submitted alongwith the banks

renewal letter and a covering letter of the Clearing Member to ICCL in the prescribed format.

Eligible securities by way of pledge:

Clearing Members can deposit approved Government Securities towards liquid assets subject to

hair cut.

Other eligible securities in dematerialised form can also be deposited towards liquid assets by way

of pledge subject to hair cut.

The list of such securities is available on BSEs website www.bseindia.com.

The format of Deed of Pledge is available on BSEs website www.bseindia.com.

Procedure for withdrawal of collaterals:

For withdrawal of collateral deposited towards liquid assets a letter in the prescribed format is to besubmitted by the Clearing Members to ICCL on any working day by 04:00 p.m.

Margins

ICCL has a robust Comprehensive Risk Management Framework. One of the vital components in the riskmanagement framework is computation and collection of various types of margins.

The margin norms in the Currency Derivatives Segment are as follows:

Initial Margin

The Initial Margin requirements are, inter alia, based on a worst case loss of a portfolio of an

individual client across various scenarios of price changes. The various scenarios of price changes

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are so computed so as to cover a 99% VaR over a one day horizon. The initial margin so computed

is subject to a minimum of 1.75% on the first day of currency futures trading and 1 % thereafter.

The initial margin is deducted upfront on an on-line real-time basis from the available liquid assets

deposited by the Clearing Member with ICCL.

Computation of Initial Margin is as per the methodology prescribed by SEBI.

Portfolio based margining system

The Standard Portfolio Analysis of Risk (SPAN) methodology is adopted to take an integrated

view of the risk involved in the portfolio of each individual client comprising his positions in futures

contracts across different maturities. The client-wise margins are grossed across various clients at

the Trading /Clearing Member level. The proprietary positions of the Trading / Clearing Member are

treated as that of a client for margining purpose.

Real time computation

The computation of worst scenario loss has two components. The first is the valuation of the

portfolio under the various scenarios of price changes. At the second stage, these scenario

contract values are applied to the actual portfolio positions to compute the portfolio values and the

initial margin. The scenario contract values are updated five times in a day. The latest available

scenario contract values are applied to member/client portfolios on a real time basis.

Calendar spread margins

A currency futures position at one maturity which is hedged by an offsetting position at a different

maturity is treated as a calendar spread. The benefit for a calendar spread continues till expiry of

the near month contract. For a calendar spread position, the extreme loss margin is charged on

one third of the mark to market value of the far month contract.

The calendar spread margins for different currency pairs are as follows:

Calendar Spread MarginContract EUR-INR GBP-INR JPY-INR USD-INR

1 month Rs. 700 Rs 1500 Rs 600 Rs. 400

2 months Rs. 1000 Rs 1800 Rs. 1000 Rs. 500

3 months Rs. 1500 Rs 2000 Rs. 1500 Rs. 800

4 months or more Rs. 1500 Rs. 2000 Rs. 1500 Rs. 1000

Extreme Loss margin

Extreme loss margin on the mark to market value of the gross open positions deducted upfront

from the available liquid assets of the clearing member on an on line, real time basis are as follows:

Contract EUR-INR GBP-INR JPY-INR USD-INR

Extreme Loss Margin 0.30% 0.50% 0.70% 1%

Additional margins

As a risk containment measure, ICCL may require clearing members to pay additional margins as

may be decided from time to time. This would be in addition to the abovementioned margins.

Collection of margins.

Aforesaid margins are computed at a client level and collected/adjusted upfront from the liquid

assets of the Clearing Members on an on-line real time basis.

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Margin Collection and Enforcement

The client margins are to be compulsorily collected and reported to ICCL/USE by the members.

Revision of Risk Management norms

ICCL may revise the aforesaid risk management norms from time to time.

CURRENCY FUTURES READY RECKONER

Specifications CURRENCY PAIR

USD-INR EUR-INR GBP-INR JPY-INR

Contract Size1 Contract is for1000 USD

1 Contract is for 1000Euros

1 Contract is for 1000Pound Sterling

1 Contract for100,000 Yen

Initial Margin

99% VaR subject tominimum of 1.75%on the first day oftrading and 1%thereafter

Initial Margincomputed is subjectto minimum of 2.80%on first day of tradingand 2% thereafter

Initial Margincomputed is subjectto minimum of 3.20%on first day of tradingand 2% thereafter

Initial Margincomputed is subjectto minimum of 4.50%on first day of tradingand 2.30% thereafter

ELM1% of MTM valueof open position

0.3% of MTM valueof open position

0.5% of MTM valueof open position

0.7% of MTM value ofopen position

CalendarSpreads

1 Contract is for1000 USD

1 Contract is for 1000Euros

1 Contract is for 1000Pound Sterling

1 Contract for100,000 Yen

1 Contract is for1000 USD

1 Contract is for 1000Euros

1 Contract is for 1000Pound Sterling

1 Contract for100,000 Yen

1 Contract is for1000 USD

1 Contract is for 1000Euros

1 Contract is for 1000Pound Sterling

1 Contract for100,000 Yen

1 Contract is for1000 USD

1 Contract is for 1000Euros

1 Contract is for 1000Pound Sterling

1 Contract for100,000 Yen

Daily

Settlement

T+1 T+1 T+1 T+1

FinalSettlement

T+2 T+2 T+2 T+2

Last TradingDay

Two working days prior to the last business day of the expiry month.

FinalSettlementDay

Last working day (excluding Saturdays) of the expiry month.

DailySettlementPrice

Calculated on basis of daily closing price of the Currency Futures Contract.

FinalSettlementPrice

RBI Reference rate on the date of expiry of the contract.

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Yours faith

(Salim GangadhaChief General Manager-In-Ch

Ann

[A. P. (DIR Series) Circular No. 05 dated August 06, 2

Currency Futures (Reserve Bank) Directions, 2008Notification No. FED.1/DG(SG)-2008 dated August 6, 2008

The Reserve Bank of India having considered necessary in public interest and to regulate the financial system of the country dvantage, in exercise of its powers conferred by section 45W of the Reserve Bank of India Act, 1934 and of all the pownabling it in this behalf, hereby gives the following directions to all the persons dealing in currency futures.

. Short title and commencement of the direct

These directions may be called the Currency Futures (Reserve Bank) Directions, 2008 and they shall come into force with erom August 6, 2008.

. Definitions

) Currency Futures means a standardised foreign exchange derivative contract traded on a recognized stock exchange to buell one currency against another on a specified future date, at a price specified on the date of contract, but does not includorward contract.

i) Currency Futures market means the market in which currency futures are traded.

. Permission

) Currency futures are permitted in US Dollar - Indian Rupee or any other currency pairs, as may be approved by the ReseBank from time to time.

i) Only persons resident in India may purchase or sell currency futures to hedge an exposure to foreign exchange rate risotherwise.

4. Features of currency futures

Standardized currency futures shall have the following featu

. Only USD-INR contracts are allowed to be tra

. The size of each contract shall be USD 1

. The contracts shall be quoted and settled in Indian Rup

. The maturity of the contracts shall not exceed 12 months.

. The settlement price shall be theReserve Banks Reference Rateon the last trading day.

5. Particip

) No person other than 'a person resident in India' as defined in section 2(v) of the Foreign Exchange Management Act, 1

http://rbi.org.in/scripts/BS_PressReleaseDisplay.aspx?prid=18927http://rbi.org.in/scripts/BS_PressReleaseDisplay.aspx?prid=18927http://rbi.org.in/scripts/BS_PressReleaseDisplay.aspx?prid=18927http://rbi.org.in/scripts/BS_PressReleaseDisplay.aspx?prid=18927

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Act 42 of 1999) shall participate in the currency futures market.

i) Notwithstanding sub-paragraph (i), no scheduled bank or such other agency falling under the regulatory purview ofReserve Bank under the Reserve Bank of India Act, 1934, the Banking Regulation Act, 1949 or any other Act or instrument hahe force of law shall participate in the currency futures market without the permission from the respective regulatory Departm

of the Reserve Bank. Similarly, for participation by other regulated entities, concurrence from their respective regulators shoulobtained.

6. Member

The membership of the currency futures market of a recognised stock exchange shall be separate from the membership ofquity derivative segment or the cash segment. Membership for both trading and clearing, in the currency futures market shaubject to the guidelines issued by the SEBI.

. Banks authorized by the Reserve Bank of India under section 10 of the Foreign Exchange Management Act, 1999 as Category - I bank are permitted to become trading and clearing members of the currency futures market of the recognized sxchanges, on their own account and on behalf of their clients, subject to fulfilling the following minimum prudential requireme

) Minimum net worth of Rs. 500 cro) Minimum CRAR of 10 per c) Net NPA should not exceed 3 per c) Made net profit for last 3 years.

The AD Category - I banks which fulfill the prudential requirements should lay down detailed guidelines with the approval of tBoards for trading and clearing of currency futures contracts and management of risks

ii) AD Category - I banks which do not meet the above minimum prudential requirements and AD Category - I banks whichUrban Co-operative banks or State Co-operative banks can participate in the currency futures market only as clients, subjepproval therefor from the respective regulatory Departments of the Reserve Bank.

. Position li

The position limits for various classes of participants in the currency futures market shall be subject to the guidelines issuehe S

. The AD Category - I banks, shall operate within prudential limits, such as Net Open Position (NOP) and Aggregate Gap (mits. The exposure of the banks, on their own account, in the currency futures market shall form part of their NOP and AG lim

. Risk Management measures

The trading of currency futures shall be subject to maintaining initial, extreme loss and calendar spread margins and the CleaCorporations / Clearing Houses of the exchanges should ensure maintenance of such margins by the participants on the bashe guidelines issued by the SEBI from time to time.

. Surveillance and disclosures

The surveillance and disclosures of transactions in the currency futures market shall be carried out in accordance withuidelines issued by the SEBI.

0. Authorisation to Currency Futures Exchanges / Clearing Corporations

Recognized stock exchanges and their respective Clearing Corporations / Clearing Houses shall not deal in or other

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ndertake the business relating to currency futures unless they hold an authorization issued by the Reserve Bank under sec0 (1) of the Foreign Exchange Management Act, 1999.

1. Powers of Reserve Bank

The Reserve Bank may from time to time modify the eligibility criteria for the participants, modify participant-wise position limrescribe margins and / or impose specific margins for identified participants, fix or modify any other prudential limits, or take

other actions as deemed necessary in public interest, in the interest of financial stability and orderly development maintenance of foreign exchange market in India.

(Shyamala GopinDeputy Gove

[Ann

[A. P. (DIR Series) Circular No. 05 dated August 06, 2

Notification No. FEMA 177 /RB-2008

dated August 01, 2

Foreign Exchange Management (Foreign Exchange Derivative Contracts) (Amendment) Regulations, 2008

n exercise of the powers conferred by clause (h) of sub-section 2 of Section 47 of the Foreign Exchange Management Act, 142 of 1999) the Reserve Bank of India makes the following amendments in the Foreign Exchange Management (For

Exchange Derivative Contracts) Regulations, 2000, (Notification No. FEMA 25/RB-2000 dated May 3, 2000) namely:-

. Short Title and Commencement:

) These Regulations may be called the Foreign Exchange Management (Foreign Exchange Derivative Contracts) (AmendmRegulations, 2008.

i) They shall come in to force from the date of their publication in the Official Gazette.

. Amendment of the Regulations

n the Foreign Exchange Management (Foreign Exchange Derivative Contracts) Regulations, 2000 (Notification No. FEMA 25000 dated May 3, 2000) (hereafter referred to as the principal regulations),

) in regulation 2, after clause (v), the following clause shall be inserted, nam

(va) 'Currency Futures means a standardised foreign exchange derivative contract traded on a recognized stock exchanguy or sell one currency against another on a specified future date, at a price specified on the date of contract, but does

nclude a forward contract."

i) in regulation 3 of the principal regulations, after the words, "foreign exchange derivative contract", the words, "or curreutures" shall be inserted.

ii) after regulation 5 of the principal regulations, the following regulation shall be inserted, namely

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5A. Permission to a person resident in India to enter into currency futures

A person resident in India may enter into a currency futures in a stock exchange recognized under section 4 of the SecurContract (Regulation) Act, 1956, to hedge an exposure to risk or otherwise, subject to such terms and conditions as may beorth in the directions issued by the Reserve Bank of India from time to time."

(Salim GangadhaChief General Manager-in-Ch