1.

Introduction:-

Currency futures were first introduced in the international money market in Chicago, USA in the

year 1972. In real life, the actual delivery rate of the underlying goods specified in futures

contracts is very low. This is a result of the fact that the hedging or speculating benefits of the

contracts can be had largely without actually holding the contract until expiry and delivering the

good(s). For example, if you were long in a futures contract, you could go short in the same type

of contract to offset your position. This serves to exit your position; much like selling a stock in

the equity markets would close a trade.

Currency futures are futures markets where the underlying commodity is a currency exchange

rate, such as the Euro to US Dollar exchange rate, or the British Pound to US Dollar exchange

rate. Currency futures are essentially the same as all other futures markets (index and commodity

futures markets), and are traded in exactly the same way. Futures based upon currencies are similar

to the actual currency markets (often known as Forex), but there are some significant differences. For

example, currency futures are traded via exchanges, such as the CME (Chicago Mercantile Exchange),

but the currency markets are traded via currency brokers, and are therefore not as controlled as the

currency futures. Some day traders prefer the currency markets, and some day traders prefer the currency

futures.

Many of the most popular futures markets that are based upon currencies are offered by the CME

(Chicago Mercantile Exchange), including the following:

 EUR - The Euro to US Dollar currency future

 GBP - The British Pound to US Dollar currency future

  CHF - The Swiss Franc to US Dollar currency future

 AUD - The Australian Dollar to US Dollar currency future

 CAD - The Canadian Dollar to US Dollar currency future

 RP - The Euro to British Pound currency future

 RF - The Euro to Swiss Franc currency future

Exchange-traded derivatives

These (ETD) are those derivatives products that are traded via specialized derivatives exchanges

or other exchanges. A derivatives exchange acts as an intermediary to all related transactions,

and takes Initial margin from both sides of the trade to act as a guarantee.

Over-the-counter (OTC) derivatives

These are contracts that are traded (and privately negotiated) directly between two parties,

without going through an exchange or other intermediary.

Because OTC derivatives are not traded on an exchange, there is no central

counterparty. Therefore, they are subject to counterparty risk.

Here currency futures are based upon the exchange rates of two currencies; they are settled in cash, in the

underlying currency.

For example, the EUR futures market is based upon the Euro to US Dollar exchange rate, and has the

Euro as its underlying currency. When a EUR futures contract expires, the holder receives delivery of

$125,000 worth of Euros in cash.

Currency Futures

A forex (foreign exchange) future is a standardized, transferable, exchange-traded contract that

requires delivery of a currency at a specified price on a specified future date. The holder of a

future has an obligation to buy or sell the currency. The risk to the holder is unlimited, and the

risk to the seller is unlimited as well. Corporations and individuals use futures to hedge (as an

insurance) against detrimental currency fluctuations. Futures are also used to speculate against

movements in currency prices.

In short:

i) Currency Futures means a standardized foreign exchange derivative contract traded

on a recognized stock exchange to buy or sell one currency against another on a

specified future date, at a price specified on the date of contract, but does not include

a forward contract. 

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

A currency future, also known as foreign exchange future or FX future, is a futures contract

to exchange one currency for another at a specified date in the future at a price (exchange

rate) that is fixed on the purchase date. The currency futures market is growing in popularity,

as the main participants of this organized market comprise bankers, importers, exporters,

multinational corporations and private speculators.

Beginning of Exchange Traded Currency Futures in India

The Reserve Bank of India in its Annual Policy Statement for the Year 2007-08 proposed to set

up a Working Group on Currency Futures to study the international experience and suggest a
suitable framework to operationalise the proposal, in line with the current legal and regulatory

framework. Following this, RBI and Securities and Exchange Board of India (SEBI) jointly

constituted a Standing Technical Committee to inter-alia evolve norms and oversee

implementation of Exchange Traded Currency Derivatives. The Committee submitted its report

on May 29, 2008. This report laid down the framework for the launch of Exchange Traded

Currency Futures in terms of the eligibility norms for existing and new Exchanges and their

Clearing Corporations/Houses, eligibility criteria for members of such Exchanges/Clearing

Corporations/Houses, product design, risk management measures, surveillance mechanism and

other related issues.

Trading mechanism

Currency futures are traded according to the rules and regulations that are drawn by the futures

exchanges. The trading can be done either on the floors of these futures exchanges or these

exchanges can facilitate electronic trading for its members. The Chicago Mercantile Exchange is

the world's largest and most successful exchange for trading in currency futures, with offices in

Chicago, New York, Washington, London and Tokyo.

The Currency Derivatives trading system of NSE, called NEAT-CDS (National Exchange for

Automated Trading – Currency Derivatives Segment) trading system, provides a fully automated

screen-based trading for currency futures on a nationwide basis as well as an online monitoring

and surveillance mechanism.

NSE was the first exchange to have received an in-principle approval from SEBI for setting up

currency derivative segment. National Stock Exchange was the first exchange to launch

Currency futures trading in India. The Currency Derivatives segment at NSE commenced
operations on August 29, 2008 with the launch of currency futures trading in US Dollar-India

Rupee (USD-INR).

The Instrument type: FUTCUR refers to 'Futures contract on currency' and Contract symbol:

USDINR denotes a currency pair of 'US Dollars – Indian Rupee'. Each futures contract has a

separate limit order book.

Permission

(i) Currency futures are permitted in US Dollar - Indian Rupee or any other currency pairs, as

may be approved by the Reserve Bank from time to time. 

(ii) Only ‘persons resident in India’ may purchase or sell currency futures to hedge an exposure

to foreign exchange rate risk or otherwise. 

Participants

(i) No person other than 'a person resident in India' as defined in section 2(v) of the Foreign

Exchange Management Act, 1999 (Act 42 of 1999) shall participate in the currency futures

market. 

(ii) Notwithstanding sub-paragraph (i), no scheduled bank or such other agency falling under the

regulatory purview of the Reserve Bank under the Reserve Bank of India Act, 1934, the Banking

Regulation Act, 1949 or any other Act or instrument having the force of law shall participate in

the currency futures market without the permission from the respective regulatory Departments

of the Reserve Bank. Similarly, for participation by other regulated entities, concurrence from

their respective regulators should be obtained. 

Membership

i.) The membership of the currency futures market of a recognized stock exchange shall be

separate from the membership of the equity derivative segment or the cash segment. Membership

for both trading and clearing, in the currency futures market shall be subject to the guidelines

issued by the SEBI. 

ii.) Banks authorized by the Reserve Bank of India under section 10 of the Foreign Exchange

Management Act, 1999 as ‘AD Category - I bank’ are permitted to become trading and clearing

members of the currency futures market of the recognized stock exchanges, on their own account

and on behalf of their clients, subject to fulfilling the following minimum prudential

requirements: 

a) Minimum net worth of Rs. 500 crores. 

b) Minimum CRAR of 10 per cent. 

c) Net NPA should not exceed 3 per cent. 

d) 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 their Boards for trading and clearing of currency futures contracts

and management of risks.

(iii) AD Category - I banks which do not meet the above minimum prudential requirements and

AD Category - I banks which are Urban Co-operative banks or State Co-operative banks can
participate in the currency futures market only as clients, subject to approval therefor from the

respective regulatory Departments of the Reserve Bank. 

Position Limits

i. The position limits for various classes of participants in the currency futures market shall be

subject to the guidelines issued by the SEBI. 

ii. The AD Category - I banks, shall operate within prudential limits, such as Net Open Position

(NOP) and Aggregate Gap (AG) limits. The exposure of the banks, on their own account, in the

currency futures market shall form part of their NOP and AG limits. 

How to Trade Currency Futures in India

There are few steps taken to successfully trade currency futures in India.

1. The Indian currency futures market is primarily focused on the exchange

rate relationship between the US Dollar and Indian Rupee. Unlike spot foreign

exchange, in which one currency is bought against the sale of the other, Indian

currency futures allow traders to bet on the anticipated direction of one currency

without short selling the other. Indian currency futures are traded domestically on

the National Stock Exchange, in Mumbai, and internationally on Dubai Gold and

Commodities Exchange, based in Dubai.

2. Open a brokerage account. You could either open an Indian futures brokerage account or

open an account with an international broker who offers you access to the Indian
 marketplace. Interactive Brokers is one of the few US-based brokers with an entire

division devoted to Indian stock and futures trading.

3. Gain knowledge about fundamental factors that affect the price of the Indian Rupee in

relation to the US Dollar and other international currencies. The primary drivers of price

change are interest rate fluctuations, and the factors that have the greatest impact on

interest rates, such as GDP growth, inflation, trade balances, and international money

flows.

4. Be acquainted with technical analysis, and use it to decide on when to buy and sell Indian

currency futures. Technical analysis is the use of price charts and indicators to better

predict what prices will be doing in the future. It can help to determine if the Rupee is

overvalued or undervalued relative to the Dollar, and at what price we might consider

entering a long or short position in the currency futures market.

5. Implement a comprehensive risk and money management plan. Indian currency futures,

like all futures contracts, are high risk, high reward instruments.

Salient features of Currency Futures in India

1. Only USD-INR contracts are allowed to be traded.

2. The size of each contract shall be USD 1000.

 3. The contracts shall be quoted and settled in Indian Rupees. The maturity of the

contracts shall not exceed 12 months.

4. The settlement price shall be the Reserve Bank’s Reference Rate on the last

trading day. 

Benefits of Currency Futures:-

The following are the benefits of currency trading in India:

 Easy Accessibility - Small investors would get an easy access to currency futures trading
on the popular exchanges
 Easy Affordability - Margins are very low and the contract size is very small
 Low Transaction Cost - As opposed to the high pay-out of commissions in overseas
forex trading, currency futures carries low costs for investors
 Transparency - It is possible for you to verify trade details on NSE if you have a doubt
that the broker has tried to cheat you
 Counter-party default risk - All the trades done on the recognized exchanges are
guaranteed by the clearing corporations and hence it eliminates the risks associated with counter
party default. NSCCL (National Securities Clearing Corporation Limited) carries out all the
notation, clearing and settlement process of currency futures trading
 Standardized Contracts - Exchange Traded currency futures are standardized in respect
of lot size ($1000) and maturity (12 monthly contracts). Retail investors with their limited
resources would find it tremendously beneficial to take positions in standardised USD INR
futures contracts
Moreover, the currency futures market is used by some companies for hedging. These companies
either purchase currency futures for their future payables, or sell the futures on currencies for
their future receipts.

Speculators may also buy or sell futures on a foreign currency as a protection against the
strengthening or weakening of the US dollar. So, speculators may be able to earn profit from the
rise or fall of these exchange rates.

The risks of trading in Currency Futures:-

Trading in Currency futures or forex trading comes with high levels of risk. Even a small adverse
fluctuation in the exchange rate may result in loss of the entire deposit of someone trading in
currency. Only people having an in-depth knowledge of the working of this market or have done
a thorough homework about the risks involved are advised to trade in this market.
Turnover

Trading in Currency Futures segment commenced on August 29, 2008. On the very first day of

operations a total number of 65,798 contracts valued at Rs.291 crore were traded on the

Exchange. Since then trading activity in this segment has been witnessing a rapid growth.

Clearing and settlement

NSCCL undertakes clearing and settlement of all trades executed on the Currency Derivatives

Segment (CDS) of the Exchange. It also acts as legal counterparty to all trades on this segment

and guarantees their financial settlement.

Risk Management Measures

The trading of currency futures shall be subject to maintaining initial, extreme loss and calendar

spread margins and the Clearing Corporations / Clearing Houses of the exchanges should ensure

maintenance of such margins by the participants on the basis of the 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 with the guidelines issued by the SEBI. 

Authorization to Currency Futures Exchanges / Clearing Corporations 

Recognized stock exchanges and their respective Clearing Corporations / Clearing Houses shall
not deal in or otherwise undertake the business relating to currency futures unless they hold an

authorization issued by the Reserve Bank under section 10 (1) of the Foreign Exchange

Management Act, 1999. 

Powers of Reserve Bank 

The Reserve Bank may from time to time modify the eligibility criteria for the participants,

modify participant-wise position limits, prescribe margins and / or impose specific margins for

identified participants, fix or modify any other prudential limits, or take such other actions as

deemed necessary in public interest, in the interest of financial stability and orderly development

and maintenance of foreign exchange market in India.

The currency derivatives segment on the NSE and MCX has witnessed consistent growth both in
traded value and open interest since its inception. The total turnover in the segment has increased
incredibly from $3.4bn in October 2008 to $84bn in December 2009. The average daily turnover
reached $4bn in December 2009. Open interest in the segment on the NSE and MCX stood at
around 4 lakh contracts till end-December 2009.

India already has an active over-the-counter (OTC) market in currency derivatives where the
average daily turnover was $29bn in 2008 and $21bn in 2009 (till September 2009). This market
is being driven by its ability to meet the respective needs of participants. For example, it is used
by importers/exporters to hedge their payables/receivables; foreign institutional investors (FIIs)
and NRIs use it to hedge their investments in India; borrowers find it an effective way to hedge
their foreign currency loans and resident Indians find it an effective tool to hedge their
investments offshore. Further, for arbitrageurs it presents an opportunity to arbitrage between
onshore and non-deliverable forward (NDF) markets.

The exchange-traded currency futures market is an extension of this already available OTC
market, but with added benefits of greater accessibility to potential participants; high price
transparency; high liquidity; standardized contracts; counterparty risk management through
clearing corporation and no requirement of underlying exposure in the currency. As the market
participants are realizing these benefits of exchange-traded market in currency, they are choosing
this market over OTC.

However, it is too early to see a major shift in activity from OTC to exchange-traded market as it
has created a niche for itself and it would perhaps take some time for the currency futures market
to create one for itself. Globally, too, the foreign exchange market is largely OTC in character.
While the notional amount outstanding of OTC derivatives was as high as $63trn in June 2008,
the exchange-traded market.
Review of literature:

Lot of literature / paper / research work is available on Currency Futures but no research

has been done on the Exchange Traded Currency Futures in Indore which has assumed greater

significance now.

Joshua. v. Rosenburg & Leah G Traub in his literature “Price Discovery in the Foreign

Currency Futures & Spot Market” investigate the importance of the futures market in Exchange

rate determination, focusing on the information content of futures order flow and the role of the

futures market in foreign currency price discovery.

Another research is being conducted by Mr.

Michael G. Papaioannou, on the topic, “Exchange Rate Risk Measurement and Management:

issues and approaches for firms”, which aims at Measuring and managing exchange rate risk

exposure is important for reducing a firm’s vulnerabilities from major exchange rate movements,

which could adversely affect profit margins and the value of assets.

A thesis submitted at the

School of Economics and Commercial Law at the Gothenburg University on the topic “The

Relationship between Currency Futures Trading Activity and Exchange Rate Volatility” by

Agnieszka Kaziow and Samuel Arbaeus investigate the relationship between the levels of trading
in currency futures and the volatility in the underlying exchange rates (on both spot and futures

markets).

Rationale of the study:-

A future contract is one where there is an agreement between two parties to exchange any assets
or currency or commodity for cash at a certain future date, at an agreed price. Futures can be
used either to hedge, perform arbitrage or to speculate on the price movement of the underlying
asset. The currency futures do not suffer from the problems like controlling and non centralized
pricing.

After having so many advantages the currency futures trading is being restricted only up to
Businessmen class people. So, here this research has been put forward to understand the basic
perception of Investors regarding investing in currency futures.
Objectives of the study: -

i. To study the business growth of Currency Futures in India. Since Exchange

Traded Currency Futures was being started on august’08 therefore this study
will help to analyze its success and growth.

ii. To study the comparison between exchange traded currency derivative and
over-the counter currency derivative in India. Over the counter is the traditional
way to trade in currency and as per the requirement of globalization trading on
Exchange is also being started.

iii. To analyze the acceptance of currency futures by investors. As acceptance as

well as awareness about Forex futures is must amongst the investors therefore
this study will identify how much the people are aware about the product.

iv. To find out the challenges to Currency Futures market in current scenario. As
all Global Events and accidents affect the whole world’s economy therefore all
the factors should be considered in view while investing in forex futures.
Research Methodology:-

Research is an art of scientific investigation. Methodology may be a description of process, or

may be expanded to include a philosophically coherent collection of theories, concepts or ideas
as they relate to a particular discipline or field of inquiry.
Research methodology is a way to systematically solve the research problem.
A research methodology defines what the activity of research is, how to proceed, how to measure
progress, and what constitutes success.
The main purpose of any research is to discover answers to the questions through the application
of scientific procedures.
For present research work, both Primary and secondary data will be used. Various tools, charts &
diagrams will be used to suggest and analyze the secondary data.

Tools of collecting Data:-

Primary Data

The data observed or collected directly from first-hand experience is called primary data.

Primary data collection is necessary when a researcher cannot find the data needed in secondary
sources.
The source of objective data is considered to be primary when the data is obtained by the
researcher directly from the research sites and when the source of perceptual data is an insider in
the research site; it is consider being primary data.
The primary data for the research will be collected
through Self-Designed Questionnaire. Investors were asked to rate their perceptions about
Currency futures on their experience using a Five point likert scale ranging from 1= Strongly
Disagree to 5= Strongly Agree. Demographic characteristics of participants were collected.

Secondary Data

The data which have been collected, tabulated in simple or composite form, and made available
for use readily in hand are secondary data.

"A secondary source is a report on the findings of the primary source.” While not as authoritative
as the primary source, the secondary source often provides a broad background and readily
improves one's learning curve.
In short, the published data and the data collected in the past or other person is called secondary
data.

The researcher has collected the secondary data for conducting this study from the following
sources:-

a. Observation: - A wide ranging set of research techniques aimed at observing

consumers interacting naturally with their surroundings including products and
services in use. A key advantage of observation research is that often the
respondent or consumer is unaware that they are being observed, allowing their
behavior to be observed naturally. It our research it includes analysis of annual
charts and various press releases E-Journals available on internet.
b. Web Search: - A search for information on the World Wide Web is called as web
search and a search engine is a software program that searches for sites based on
the words that you designate as search terms. The information related to investors,
growth of currency futures & its turnover is studied & referred from the websites
on internet for this study.
c. Research papers & journals, technical materials by professionals have made the
research much easier.

Sample size:
Sample size is the number of observations used for calculating estimates of a given population.
Sample sizes reduce expenses and time by allowing researchers to estimate information about a
whole population without having to survey each member of the population. Formulas, tables, and
power function charts are well known approaches to determine sample size.
In this research the sample size of 35 investors is considered.

Sample Universe:
A population can be defined as including all people or items with the characteristic one wish to
understand. 
Population in universe refers to the investors of currency futures and sample is referred to the
part of population taken to test the hypothesis. The population means from which our sample is
drawn. 

Sampling Technique:
Convenience sampling is a type of non-probability sampling which involves the sample being
drawn from that part of the population which is close to hand. That is, a sample population
selected because it is readily available and convenient. It may be through meeting the person or
including a person in the sample when one meets them or chosen by finding them through
technological means such as the internet or through phone.
The sampling technique for research is convenient sampling technique that will help to take
sample.

Area of Study:
The study will be conducted on investors of Currency Futures in Indore.

Data Collection

Data is collected through Self-Designed Questionnaire

Data Analysis

Since the sample size is above 30 therefore Z-Test is being applied on this data at 5% level of
significance.

Hypothesis:-

Hypothesis is generally considered as the principal instrument in research. It is tentative

assumption made in order to test its logical consequences in development of research.
A hypothesis is a proposed explanation for an observable phenomenon. The term derives from
the Greek hypotithenai meaning "to put under" or "to suppose."
A supposition; a proposition or principle which is supposed or taken for granted, in order to draw
a conclusion or inference for proof of the point in question; something not proved, but assumed
for the purpose of argument, or to account for a fact or an occurrence; as, the hypothesis that
head winds detain an overdue steamer.
A tentative theory or supposition provisionally adopted to explain certain facts, and to guide in
the investigation of others; hence, frequently called a working hypothesis.

According to research hypothesis:

Ho: - Exchange Traded Currency Futures is a not good source of investment in Forex market.

H1:- Exchange Traded Currency Futures is a good source of investment in Forex market.
H0:- People are not aware about investment in Exchange Traded Currency Futures.

H2:- People are aware about investment in Exchange Traded Currency Futures.

H0:- Investment in currency futures is not restricted to the Import Export business only.
 H3:- Investment in currency futures is restricted to the Import Export business only.

H0:- Investment through Exchange in Currency Futures is not a better option than Over the
counter.
H4:- Investment through Exchange in Currency Futures is a better option than Over the counter.

H0:- It has not achieved a significant growth in Indian Market after its launch in August’08.

H5:- It has achieved a significant growth in Indian Market after its launch in August’08.

H0:- The underlying asset in currency futures is currency therefore it does not assumes higher
degree of risk.
H6:- The underlying asset in currency futures is currency therefore it assumes higher degree of
risk.
H0:- This instrument does not acts as a good hedging tool since the value of currency is very
fluctuating.
H7:- This instrument act as a good hedging tool since the value of currency is very fluctuating.

H0:- I think investment in Forex market is not a much better then share market or commodity
market.
H8:- I think investment in Forex market is a better then share market or commodity market.

H0:- Global Events and accidents do not highly affect the forex market leading to decrease in
investment in currency futures at exchange.
H9:- Global Events and accidents affect the forex market leading to decrease in investment in
currency futures at exchange.
H0:- Currency Futures is more speculative as compared to other instruments as four digits are
taken after decimal
H10:- Currency Futures is less speculative as compared to other instruments as four digits are taken
after decimal.
H0:- FII’s and NRI’s should not be permitted to participate in Forex Derivatives.
H11:- FII’s and NRI’s should be permitted to participate in Forex Derivatives.
H0:- I think currency as underlying asset is not better than commodities, equities (stocks), weather
or index.
H12:- I think currency as underlying asset is better than commodities, equities (stocks), weather or
index.
H0:- Trading in Exchange Traded Forex Derivatives is not easier to understand and invest.
H13:- Trading in Exchange Traded Forex Derivatives is easier to understand and invest.

(i) The chart below shows the difference as per gender:-

Count of Gender

F
M

Count of
Gender Count of Gender Gender2
F 12 12
M 23 23
Grand
Total 35 35
(ii) The chart below shows the difference as per profession:-

25

20

15
Businessman
Others
10 Stock Brocker

0
Total

Count of
Profession Profession      
Grand
  Businessman Others Stock Broker Total
Total 7 20 8 35
(iii) The chart below shows the income level of investors:-

14

12

10

8
1.2-2.4 lacs
2.4-3.6 lacs
6
3.6 & above

0
Total

Count of income
level    
Grand
  1.2-2.4 lacs 2.4-3.6 lacs 3.6 & above Total
Total 12 6 8 26
Analysis:

Statement 1: Exchange Traded Currency Futures is a good source of investment in Forex

market.

x f Mean Population Standard Z-test

mean (µ) deviation

R1 4.14 3 3.27 0.35

R2

R3

R4

R5

Total Tabulated value 0.1368

Result: Since the tabulated value is less than calculated value therefore Null
Hypothesis is rejected. Exchange Traded Currency Futures is a good source of investment in
Forex market.

Statement 2: People are aware about investment in Exchange Traded Currency Futures.
 x f Mean Population mean Standard Z-test
(µ) deviation

R1 2.8 3 1.28 0.16

R2

R3

R4

R5

Tabulated value 0.0596

Result: Since the tabulated value is less than calculated value therefore Null
Hypothesis is rejected. Hence, people are aware about currency Futures.

Statement 3: Investment in currency futures is restricted to the Import Export business only..

x f Mean Population mean Standard Z-test

(µ) deviation

R1 2.46 3 0.873 0.62

R2

R3

R4

R5

Tabulated value 0.2422

Result: Since the tabulated value is less than calculated value therefore Null
Hypothesis is rejected. Hence, Investment in currency futures is restricted to the Import
Export business only.

Statement 4: Investment through Exchange in Currency Futures is a better option than Over the
counter.

x f Mean Population mean Standard Z-test

(µ) deviation

R1 3.8 3 0.854 0.93

R2

R3

R4

R5

Tabulated value 0.3289

Result: Since the tabulated value is less than calculated value therefore Null
Hypothesis is rejected. Hence, Investment through Exchange in Currency Futures is a better
option than Over the counter.

Statement 5: It has achieved a significant growth in Indian Market after its launch in August’08.
 x f Mean Population mean Standard Z-test
(µ) deviation

R1 3.6 3 1.15 0.52

R2

R3

R4

R5

Tabulated value 0.2088

Result:
Since the tabulated value is less than calculated value therefore Null Hypothesis is
rejected. It has achieved a significant growth in Indian Market after its launch in August’08.

Statement 6: The underlying asset in currency futures is currency therefore it assumes higher
degree of risk.

x f Mean Population mean Standard Z-test

(µ) deviation

R1 3.54 3 1.2 0.45

R2

R3

R4

R5

Tabulated value 0.1736

Result: Since the tabulated value is less than calculated value therefore Null
Hypothesis is rejected. Hence, The underlying asset in currency futures is currency therefore it
assumes higher degree of risk.

Statement 7: This instrument act as a good hedging tool since the value of currency is very
fluctuating

x f Mean Population mean Standard Z-test

(µ) deviation

R1 3.28 3 0.94 0.30

R2

R3

R4

R5

Tabulated value 0.1368

Result: Since the tabulated value is less than calculated value therefore Null
Hypothesis is rejected. Hence, This instrument act as a good hedging tool since the value of
currency is very fluctuating
Statement 8: I think investment in Forex market is a better then share market or commodity
market.

x f Mean Population mean Standard Z-test

(µ) deviation

R1 2.828 3 1.483 0.116

R2

R3

R4

R5

Tabulated value 0.0596

Result: Since the tabulated value is less than calculated value therefore Null
Hypothesis is rejected. Hence, investment in Forex market is a better option then share market
or commodity market.

Statement 9: Global Events and accidents affect the forex market leading to decrease in
investment in currency futures at exchange.

x f Mean Population mean Standard Z-test

(µ) deviation

R1 3.285 3 1.41 0.20

R2

R3

R4

R5

Tabulated value 0.0987

Result: Since the tabulated value is less than calculated value therefore Null
Hypothesis is rejected. Hence, Global Events and accidents affect the forex market leading to
decrease in investment in currency futures at exchange.

Statement 10: Currency Futures is less speculative as compared to other instruments as four
digits are taken after decimal.

x f Mean Population mean Standard Z-test

(µ) deviation

R1 3.6 3 1.1 0.54

R2

R3

R4

R5

Tabulated value 0.2088

Result: Since the tabulated value is less than calculated value therefore Null
Hypothesis is rejected. Hence, Currency Futures is less speculative as compared to other
instruments as four digits are taken after decimal.
Statement 11: FII’s and NRI’s should be permitted to participate in Forex Derivatives.

x f Mean Population mean Standard Z-test

(µ) deviation

R1 3.23 3 1.07 0.21

R2

R3

R4

R5

Tabulated value 0.0987

Result: Since the tabulated value is less than calculated value therefore Null
Hypothesis is rejected. Hence, FII’s and NRI’s should be permitted to participate in Forex
Derivatives.

Statement 12: I think currency as underlying asset is better than commodities, equities (stocks),
weather or index.

x f Mean Population mean Standard Z-test

(µ) deviation

R1 3.1428 3 1.439 0.099

R2

R3

R4

R5

Tabulated value 0.0596

Result: Since the tabulated value is less than calculated value therefore Null
Hypothesis is rejected. Hence, I think currency as underlying asset is better than commodities,
equities (stocks), weather or index.

Statement 13: Trading in Exchange Traded Forex Derivatives is easier to understand and
invest.

x f Mean Population mean Standard Z-test

(µ) deviation

R1 3.6 3 1.268 0.473

R2

R3

R4

R5

Tabulated value 0.2088

Result: Since the tabulated value is less than calculated value therefore Null
Hypothesis is rejected. Hence, Trading in Exchange Traded Forex Derivatives is easier to
understand and invest.
Limitation of the study:

i. There exists lack of knowledge in investors, since the above research is being
conducted after 18 months of prologue of forex derivatives in India.

ii. The analytical study was time consuming in view of the fact that it will be
incomplete without charts, facts & figures.

Conclusion:-

Towards the end, the research concludes that:-

 Exchange Forex derivatives are being accepted by Indian investors but by

reason of lack of awareness in general public & its application is confined to traders
only so as a result it has decrease its use.

 Since the currency futures are traded up to four digits after a decimal, it reduces
speculations.

Suggestions & Recommendations:-

i. Exchange Forex derivatives are being traded with only currency as underlying so
it should be traded in other underlying also, like an assets [e.g. commodities, equities (stocks)],
or an index [e.g., interest rates, exchange rates, stock market indices, consumer price index
(CPI)], or other items (e.g., weather conditions, or other derivatives).

ii. Exchange Currency derivatives are highly used in import-export contracts so it

decreases the concern of general investors in it.
 iii. The norms regarding becoming trading & clearing members of market are too
complex. These needs to be simplify.

iv. Options proves to be a good tool of hedging but it’s not been traded in Indian
Forex Exchange Derivatives, so trading in options should be started.

v. FIIs and NRIs are not permitted to participate in currency futures market, so they
should also be allowed to get involved in exchange forex derivatives, as these are also one of the
major players in stock market.