SEBI sets single USD 5 million limit for currency derivatives without proof of exposure
SEBI has aligned exchange-traded currency derivatives with RBI's revised rules: domestic clients and FPIs can hold positions up to USD 5 million without showing an underlying exposure.
Key points
- SEBI issued a circular on 5 November 2026 revising limits for currency derivatives traded on stock exchanges, following an RBI circular.
- Domestic clients and FPIs may take positions of up to USD 5 million across all rupee pairs and exchanges without proving underlying exposure.
- Positions above USD 5 million need an underlying exposure for FPIs, and must meet RBI's conditions for domestic clients.
The Securities and Exchange Board of India (SEBI) has revised the limits up to which traders can take positions in exchange-traded currency derivatives without proving they have an underlying foreign-exchange exposure. Under its circular dated 5 November 2026, domestic clients and foreign portfolio investors (FPIs) may hold long or short positions of up to USD 5 million in contracts involving the Indian rupee.
What Happened
SEBI said the change follows a Reserve Bank of India circular dated 10 October 2026 on risk management and inter-bank dealings, which revised the thresholds for taking positions in rupee foreign-exchange derivatives without establishing an underlying exposure. An underlying exposure is a real need to hedge, such as an import payment or a foreign investment. RBI also set additional requirements on cancelling and rebooking such contracts and on documents for hedging.
SEBI has modified its master circular for stock exchanges and clearing corporations accordingly. The USD 5 million limit is a single limit on notional value outstanding at any time, across all currency pairs involving the rupee, combined across all recognised stock exchanges.
FPIs must keep their short positions across all foreign currency-rupee contracts on all exchanges within USD 5 million. To take long positions above USD 5 million, an FPI must have an underlying exposure in Indian debt or equity securities, including units of equity or debt mutual funds. Domestic clients may go above USD 5 million subject to the conditions in RBI's master direction on risk management and inter-bank dealings and its 10 October 2026 circular.
What It Means
For individuals and businesses trading currency futures and options on Indian exchanges, the circular sets one combined ceiling of USD 5 million across exchanges and currency pairs for positions taken without documents showing an exposure. Positions above that level need the supporting conditions RBI has laid down.
Stock exchanges and clearing corporations must change their systems and bye-laws, inform brokers and clearing members, publish the change on their websites and report to SEBI on implementation. All other terms of the master circular stay unchanged. Complaints against brokers can be filed at https://scores.sebi.gov.in.
Source: SEBI circular
Sources & Citations
- SEBI circular — Securities and Exchange Board of India