The Reserve Bank of India has raised several concerns over the government's proposal to use the existing infrastructure of stock exchanges for introducing currency futures.
In its technical advisory committee meeting with market participants yesterday, RBI said that foreign exchange and related activities should be isolated from all other businesses of exchanges and for the participants in the market like banks or brokers.
Further, any existing exchange, even if allowed to float a platform for currency futures, should have a diversified shareholding pattern.
At present, commodity exchanges, other than stock bourses which have evinced interest in floating currency futures, do not have diversified holdings, according to sources.
The National Stock Exchange and the Multi Commodity Exchange have reportedly applied for currency futures trading.
Besides the regulations and the use of the trading platform, all other norms for currency futures in the final draft will remain similar to the draft guidelines issued by RBI. The final draft will be issued shortly.
In its draft proposal, RBI had favoured the standalone platform for currency futures while the government is supporting use of existing exchange infrastructure.
According to the government, it will involve lot of additional cost and time to develop independent platforms just for currency futures trading.
In response to this, RBI said exchanges could float separate bourses for the currency futures business as it would become a wholly owned independent subsidiary with separate books.
The structure will be similar to the Chinese wall maintained by banks in their primary dealer business.
"There should separate prudential and operational guidelines for the participants and platforms independent of the exchanges. Moreover, the authority for regulating such platforms should be clearly spelt out since foreign exchange management is an sole purview of the central bank," the sources said.
Further, banks who would be the major participants in the currency futures business are regulated by RBI.
