Mumbai: The National Stock Exchange (NSE) will start live trading in currency futures from 29 August.

Three exchanges, the National Stock Exchange, the Bombay Stock Exchange and the Multi Commodity Exchange of India (MCX), have sought permission from the Securities and Exchange Board of India (SEBI) for starting currency futures trading. 

The Reserve Bank of India had, earlier, issued guidelines for trading in currency futures.

As per the guidelines, only resident Indians would be allowed to deal in exchange-traded currency futures to hedge an exposure to foreign exchange rate risk or otherwise.

Only dollar-rupee contracts will be allowed and each contract would be required to have a of $1,000 (equivalent to about Rs42,000).

The initial contracts would have an upper limit of $25 million and would mainly benefit small corporates with limited forex exposures, banking sources said.

The contracts should be quoted and settled in rupees and the maturity of the contracts should not exceed 12 months, the RBI had said.

The settlement price of the contract would be the RBI's reference rate on the last trading day.

The membership of the currency futures market of a recognised stock exchange should be separate from the membership of the equity derivatives segment or the cash segment.

The RBI guidelines, called the Currency Futures (Reserve Bank) Directions, 2008, come into force immediately.

The dollar constitutes more than 75 per cent of nearly $100 billion worth of currency futures trades globally each day. Transactions on the the foreign exchange market, including spot markets, top $4 trillion every day.

While currency markets tend to be volatile, corporates hope to avert some of their forex risks through currency futures despite chances of derivative losses.