Currency Derivatives Trading in India : Futures vs Forwards

An attempt is made to study the pattern of trade, comparative economics forex derivates and the impact of futures on forwards and spot. The existing trends so far suggest that despite the significant rise in futures volumes, there was no notable shift in volumes from forwards to futures market. The fee structure and near-month liquidity in currency futures possibly attracted the participation of arbitragers and speculators, while the hedgers continued to prefer OTC forward contracts due to the flexibility and customization particularly in case of long term requirements. Thus, the remarkable growth in futures could not bring any notable changes in forward markets so far since the purpose as well as nature of participation in futures was different from that of the forwards market