CURRENCY DERIVATIVES SEGMENT

Circular No. 026

Launch of Currency Options on US Dollar – Indian Rupee Spot rate

Exchange has received approval from SEBI and RBI for introducing Exchange traded

Currency Options on US Dollar – Indian Rupee Spot rate. Currency Options Contracts

will be launched in the Currency Derivatives Segment of the Exchange on Friday,

October 29, 2010.

In pursuance of Trading Regulations of the Exchange, the Exchange notifies the

following specifications for Currency Option contracts as per Annexure I:

Contract Information

a) Underlying currency

b) Contract descriptor

c) Contract trading cycle

d) Expiry day & time

e) Contracts available for trading

f) Option Type

Trading parameters

a) Order quotation

b) Permitted lot size

c) Order placement

d) Tick Size

e) Quantity Freeze

f) Base Price

g) Strike Price/ Introduction of new contracts at new strike price / strike price

intervals

h) Price range / Operating range

Option contracts available for trading will be intimated through a separate circular on

October 28, 2010.

For and on behalf of

National Stock Exchange of India Limited

Suprabhat Lala

Vice President

Date: Oct 27, 2010

Download No.: 16136

Vikramaditya Delima

Vikas Mishra

Sonali Karnik

022-26598131

022-26598164

022-26598325

cdtrade@nse.co.in

No of Pages: 4

Annexure I

CONTRACT INFORMATION

a) Underlying currency

Contracts Currency Option on US Dollar - Indian Rupee

Underlying The spot rate in Indian Rupees for US Dollar

b) Contract Descriptor

Contracts US Dollar - Indian Rupee Options contract

Market type N

Instrument Type OPTCUR

Trading Symbol USDINR

Expiry date Date of Contract Expiry (two working days prior to the last business day of

the expiry month)

c) Contract trading cycle

To begin with the Exchanges shall offer 3 consecutive monthly contracts and 1 quarterly

contract. New contracts shall be issued on expiration of an existing month contract.

For every month, there shall be separate ‘call’ and ‘put’ option contracts. New contracts will

be introduced after 12 noon on the last trading day of the near month contract.

d) Expiry day & time

USDINR Options contracts shall expire at 12 noon, two working days prior to the last business

day of the expiry month.

e) Contracts available for trading

Options contracts having the following expiries shall be available for trading on USDINR. On

the expiry of a near month contract, new contracts shall be made available so that at any point

in time there shall be at least four expiries available for trading.

Sr. No. Expiry Date Maturity Date Remarks

1 26 NOV 2010 26 NOV 2010 Monthly Contract

2 29 DEC 2010 29 DEC 2010 Monthly Contract

3 27 JAN 2011 27 JAN 2011 Monthly Contract

4 29 MAR 2011 29 MAR 2011 Quarterly Contract

f) Option Type

As per the guidelines the Exchange is introducing European style CE/PE (CE = Call; PE =

Put) option contracts, which means an option contract cannot be exercised during the validity of

the contract and is automatically settled on the expiration day, subject to conditions as may

be stipulated by the Exchange from time to time.

TRADING PARAMETERS

a) Order quotation

Method of order quotation shall be as follows

Currency Option Method of quotation

USDINR Premium in Rupee term and outstanding positions in USD term

b) Permitted lot size

Currency Option Permitted lot size per contract

USDINR One lot denotes 1000 US Dollars

c) Order placement

Members shall place orders in terms of number of lots.

d) Tick Size

The minimum tick size by which the USD – INR currency options contract can be bought or

sold shall be 0.25 paisa or ` 0.0025 (quarter of a paisa) i.e. Orders can be placed at minimum

price intervals of 0.0025.

e) Quantity Freeze

Quantity Freeze for USDINR Options Contracts shall be 10001 lots or greater i.e. orders having

quantity up to 10000 lots shall be allowed. In respect of orders which have come under quantity

freeze, the members would be required to confirm to the Exchange that there is no inadvertent

error in the order entry and that the order is genuine. On such confirmation, the Exchange may

approve such order. However, in exceptional cases, the Exchange may, at its discretion, not

allow the orders that have come under quantity freeze for execution for any reason whatsoever

including non-availability of turnover / exposure limits.

f) Base Price

Base price of USDINR Options Contracts on the first day shall be the theoretical price. The

base price of contracts on subsequent trading days will be the daily settlement price of the

respective options contracts. The formula for calculation of base price will be as per Black-

Scholes model.

g) Strike Price/ Introduction of new contracts at new strike price / strike price intervals

1. The price specified in the options contract, which shall be reckoned for the settlement of the

contract, shall be called the strike price.

2. The Exchange shall provide a minimum of 25 strike prices for every option type (i.e. call & put)

for each expiry. There shall be twelve contracts in-the-money (ITM), twelve contracts out-of-

the-money (OTM) and one contract at-the-money (ATM). The strike price interval shall be of `

0.25.

3. New contracts with new strike prices for existing expiration date will be introduced for trading

on the next working day based on the previous day's US Dollar – Indian Rupee spot rate at 5:00

pm and as and when required based on point (2) above.

4. The in-the-money strike price and the out-of-the-money strike price shall be based on the at-the-

money strike price interval as per point (2) above.

h) Price range / Operating range

There shall be no daily price bands applicable for USDINR Options contracts. However in order

to prevent erroneous order entry by members, operating ranges will be kept at +/- 99% of the base

price or ` 1, whichever is higher, for all contracts. Any price beyond the same shall be rejected by

the Exchange. The operating range of the option contracts may be modified, at the discretion of the

Exchange, based on the request received from trading members.