Cross Currency Pairs

19.1 The Reign of Forex: Cross-Currency Trading Comes Home

Varun: Isha, I’ve always wanted to trade global currency pairs like EUR/USD and GBP/USD. Is that possible from India now?

Isha: Yes! NSE now offers cross-currency futures and options under SEBI’s regulation. You can trade EUR/USD, GBP/USD, and USD/JPY directly—no offshore brokers needed.

Varun: That’s a game-changer. So it’s all INR-settled and transparent?

Isha: Exactly. You get local settlement, INR margins, and full regulatory oversight. It’s Forex trading, brought home.

Globally, the foreign exchange (Forex) market is the largest and most liquid financial market, with trillions of dollars traded daily. From retail traders in Tokyo to institutional desks in London, Forex futures dominate the landscape. Until recently, Indian traders had limited access to the most popular international currency pairs. But that’s changing fast.

Thanks to regulatory advancements, cross-currency futures and options are now available on the National Stock Exchange (NSE), allowing Indian traders to participate in global currency movements without relying on offshore brokers or unregulated platforms.

The Big Three: Most Traded Currency Pairs

Globally, the most heavily traded currency futures involve the US Dollar on one side. According to the Bank for International Settlements (BIS), nearly 88% of all Forex transactions involve USD. Among these, three pairs dominate:

• EUR/USD – Euro vs US Dollar
• GBP/USD – British Pound vs US Dollar (nicknamed “The Cable”)
• USD/JPY – US Dollar vs Japanese Yen

These pairs are now tradable on NSE, offering Indian traders exposure to global macro trends, interest rate differentials, and geopolitical shifts.

Then vs Now: How Access Has Changed

Just a few years ago, trading these pairs meant opening accounts with offshore brokers—often registered in jurisdictions like Cyprus, Belize, or the Isle of Man. Traders had to wire funds internationally, rely on opaque pricing, and operate outside India’s regulatory umbrella. It was risky, expensive, and often unreliable.

Today, you can trade cross-currency futures and options directly on NSE, under the supervision of SEBI, with full transparency, local settlement, and INR-denominated margins. This shift has democratized access and brought global Forex trading within reach of Indian investors.

Understanding Currency Pairs: Base vs Quote

Every currency pair is structured as Base Currency / Quote Currency. The base currency is the one being bought or sold, while the quote currency is used to express its value.

Example 1: EUR/USD = 1.2342

This means 1 Euro = 1.2342 US Dollars. If you’re buying EUR/USD, you’re buying Euros and paying in Dollars.

Example 2: USD/JPY = 149.85

This means 1 US Dollar = 149.85 Japanese Yen. If you are selling USD/JPY, you are selling Dollars and receiving Yen.

Here’s a quick reference table:

Order Book Dynamics: Bid vs Ask

Let’s say you’re looking at the EUR/USD order book. Here’s how it might look:

If you want to buy EUR/USD, you’ll pay the ask price—say, 1.2433 USD per Euro. If you want to sell, you’ll receive the bid price—say, 1.2431 USD per Euro. The difference between the two is the spread, which reflects market liquidity and broker costs.

Real-World Scenario: Trading GBP/USD Ahead of a BoE Rate Decision

• Imagine the Bank of England (BoE) is expected to raise interest rates. Traders anticipate a stronger Pound. You decide to go long on GBP/USD at 1.2780. If the rate hike materializes and the pair moves to 1.2850, you profit from the appreciation of GBP against USD.
• Conversely, if the BoE surprises with a dovish stance, GBP/USD could drop to 1.2700, and your position would incur a loss.

19.2 –Currency Futures Contracts on NSE: Structure and Trading Logic

Varun: Isha, how are these cross-currency futures structured?

Isha: Each contract represents 1,000 units of the base currency. So for EUR/USD, it’s 1,000 Euros.

Varun: That makes sizing easier. What about tick size?

Isha: For EUR/USD and GBP/USD, it’s 0.0001. For USD/JPY, it’s 0.01. Each pip move affects your P&L based on lot size.

Varun: And expiry?

Isha: Near-month contracts expire two business days before month-end. You also get 12 monthly contracts to choose from.

18.2 – Currency Futures Contracts on NSE: Structure and Trading Logic

With the launch of cross-currency futures and options on the National Stock Exchange (NSE), Indian traders now have direct access to global currency pairs like EUR/USD, GBP/USD, and USD/JPY—all under a regulated framework. While options may take time to gain traction, near-month futures contracts are already drawing interest due to their liquidity and simplicity.

Lot Size Standardization Across Currency Pairs

One of the most trader-friendly features is the uniform lot size across all listed currency pairs. Each contract represents 1,000 units of the base currency, which simplifies position sizing and margin calculations.

Let’s look at a few examples:

This standardization ensures consistency across contracts and makes it easier for traders to switch between pairs based on macro trends or technical setups.

Tick Size and Price Movement Sensitivity

Each currency pair has a defined tick size, which determines the minimum price movement on the exchange:

• For EUR/USD and GBP/USD, the tick size is 0.0001 (i.e., 1 pip).
• For USD/JPY, the tick size is 0.01 (since Yen is quoted in whole numbers).

Example: EUR/USD Futures

If EUR/USD moves from 1.0850 to 1.0851, that’s a 1-pip move. For a 1,000 EUR lot, this translates to a $0.10 change per pip. If the pair moves 50 pips, the profit or loss would be $5 per contract.

Contract Availability and Expiry Logic

NSE offers 12 monthly contracts for each currency pair, allowing traders to choose between near-term and longer-dated positions. The near-month contract expires two business days before the last trading day of the calendar month.

Example: GBP/USD November 2025 Contract

• Contract introduced: August 2025
• Expiry date:28 November 2025 (assuming 30 November is the last trading day)

This structure ensures smooth rollover and aligns with global trading calendars.

Why Lot Size Matters

The fixed lot size of 1,000 units becomes especially relevant when calculating:

• Margin requirements
• Tick value
• Profit/loss per pip
• Hedge ratios for exporters/importers

For instance, an Indian exporter receiving payments in British Pounds can hedge future inflows by shorting GBP/USD futures, knowing each contract represents exactly 1,000 GBP.

19.3 Cross-Currency Futures: How Profit and Loss Is Calculated

Varun: Isha, when I trade EUR/USD futures, how is my profit shown?

Isha: Initially, it’s in USD—the quote currency. Then it’s converted to INR using RBI’s reference rate published daily at 12:30 PM.

Varun: So my final P&L is INR-settled?

Isha: Yes. Whether you trade EUR/USD, GBP/USD, or USD/JPY, your P&L is converted to INR at day-end and credited to your account.

18.3 – Cross-Currency Futures: How Profit and Loss Is Calculated

When trading cross-currency futures on NSE—such as EUR/USD, GBP/USD, or USD/JPY—it’s important to understand how profit and loss (P&L) is displayed and settled. Unlike equity, commodity, or INR-based currency contracts, where P&L is shown directly in Indian Rupees, cross-currency contracts operate differently.

P&L Displayed in Quote Currency

For cross-currency trades, your initial profit or loss is calculated in the quote currency of the pair. This means:

• For EUR/USD, your P&L is in US Dollars.
• For GBP/USD, your P&L is also in US Dollars.
• For USD/JPY, your P&L is in Japanese Yen.

This is because the futures contracts are structured around the global convention of quoting currency pairs in the second currency (the quote currency).

Conversion to INR Using RBI Reference Rate

At the end of each trading day, the P&L is converted to INR using the RBI reference rate, which is published daily at 12:30 PM IST. Here’s how it works:

• For EUR/USD and GBP/USD, the P&L in USD is converted using the USD/INR reference rate.
• For USD/JPY, the P&L in JPY is converted using the JPY/INR reference rate.

Example: EUR/USD Futures Trade

Let’s say you go long on EUR/USD at 1.0850 and exit at 1.0900. That’s a 50-pip gain, which equals $50 for a 1,000 EUR lot. If the RBI reference rate for USD/INR is ₹83.20, your profit in INR would be:

This INR amount is credited to your trading account after conversion.

Carry–forward Positions and Daily Settlement

For positions held overnight, the daily mark-to-market (M2M) settlement is based on the Daily Settlement Price (DSP)—which is the weighted average price of the last 30 minutes of trading. This ensures fair valuation and consistent settlement across all participants.

Each day, your position is revalued based on the DSP, and the resulting P&L (in the quote currency) is converted to INR using the RBI reference rate.

19.4 Cross-Currency Options: Structure and Specifications

Varun: Isha, are options available on these currency pairs too?

Isha: Absolutely. NSE offers European-style options on EUR/USD, GBP/USD, and USD/JPY. You can choose monthly or quarterly expiries.

Varun: And premiums?

Isha: Quoted in the quote currency—USD for EUR/USD and GBP/USD, JPY for USD/JPY. Strike intervals vary by pair, giving you 25 strikes per series.

Following the successful roll-out of USDINR options, Indian exchanges have extended their derivatives offering to include options on global currency pairs such as EUR/USD, GBP/USD, and USD/JPY. These contracts are now available for trading on NSE, offering Indian traders a regulated and transparent way to participate in global currency movements.

Contract Design and Expiry Style

All cross-currency options listed on NSE follow the European-style expiry, meaning they can only be exercised on the expiration date, not before. This simplifies settlement and aligns with global standards for currency derivatives.

Premium Quotation

The option premium is quoted in the quote currency of the pair:

• For EUR/USD and GBP/USD, premiums are quoted in US Dollars.
• For USD/JPY, premiums are quoted in Japanese Yen.

This ensures consistency with international pricing conventions and reflects the actual cost of the option in the global market.

Contract Cycle and Availability

Each currency pair offers a mix of monthly and quarterly contracts:

• Three continuous monthly contracts are available at any given time.
• Three quarterly contracts are listed, spaced at three-month intervals.

This structure allows traders to choose between short-term tactical positions and longer-term strategic hedges.

Strike Price Range and Intervals

For each option series, exchanges provide a wide range of strikes to accommodate different market views:

• 12 In-the-Money (ITM) strikes
• 12 Out-of-the-Money (OTM) strikes
• 1 Near-the-Money (NTM) strike

This gives traders access to 25 strike prices per contract, ensuring flexibility in strategy design.

Strike Price Intervals by Pair

For example, if EUR/USD is trading at 1.0850, the available strikes might range from 1.0250 to 1.1450, in steps of 0.005.

19.5 Expiry and Final Settlement of Cross-Currency Contracts

Varun: Isha, how is the final settlement price calculated for these contracts?

Isha: It’s based on RBI’s reference rates. For example, EUR/USD = EURINR ÷ USDINR.

Varun: So everything is benchmarked to INR?

Isha: Yes. Futures are marked to market at expiry, and options are settled based on intrinsic value using these reference rates.

All near-month cross-currency futures and options contracts listed on NSE expire two business days before the last trading day of the calendar month, with expiry time set at 12:30 PM IST. Settlement is based on the final settlement price, which is derived using RBI’s reference rates for the respective currencies.

How Final Settlement Price Is Calculated

The final settlement price for a currency pair is calculated using the RBI reference rates of the individual currencies involved, quoted in INR. These rates are published daily at 12:30 PM and serve as the benchmark for settlement.

Example Reference Rates (October 2025)

To calculate the final settlement price of a pair like EUR/USD, divide the EURINR rate by the USDINR rate:

This value becomes the final settlement price for the EUR/USD contract.

Settlement Process and Timeline

• Futures contracts are marked to market at the final settlement price.
• Settlement is cash-based and completed on a T+2 basis (two trading days after expiry).
• For options contracts, the intrinsic value of all in-the-money (ITM) positions is calculated using the final settlement price.

Example: USD/JPY Put Option Settlement

Let’s say you hold a USD/JPY Put option with a strike price of 150.00, and the final settlement price is 149.30.

• Intrinsic value per contract (JPY) = 150.00 − 149.30 = 0.70 JPY
• RBI reference rate for JPY/INR = ₹0.5630
• Exercise amount in INR = 0.70 × ₹0.5630 = ₹39.41

This amount is credited to your account for each lot of 1,000 USD (base currency).

19.6 Margin Requirements for Cross-Currency Futures

Varun: Isha, how much margin do I need to trade these contracts?

Isha: Total margin is 3% of contract value—2% initial plus 1% extreme loss. It’s blocked in INR but calculated using the quote currency.

Varun: Does timing affect margin calculation?

Isha: Yes. Trades before 2 PM use the previous day’s RBI rate. After 2 PM, the current day’s rate applies.

When trading cross-currency futures like EUR/USD, GBP/USD, or USD/JPY on NSE, it’s important to understand how margins are calculated and applied. These contracts are settled in Indian Rupees, but the trading and profit/loss are denominated in the quote currency—typically USD or JPY.

Margin Structure

• Initial Margin: 2% of the contract value
• Extreme Loss Margin: 1% of the contract value
• Total Margin Requirement: 3% of the contract value

All margins are blocked in INR, but since the contracts trade in foreign currencies, the margin amount is converted to the quote currency using the RBI reference rate.

Timing Matters: Reference Rate Logic

• Trades placed before 2:00 PM: Margin is calculated using the previous trading day’s RBI reference rate.
• Trades placed after 2:00 PM: Margin is calculated using the current day’s RBI reference rate, published at 12:30 PM IST.

Example: EUR/USD Futures Trade

Let’s say you’re trading EUR/USD with a contract size of 1,000 EUR, and the current price is 1.0850 USD/EUR.

• Contract Value = 1,000 × 1.0850 = $1,085
• Total Margin (3%) = $32.55
• If the RBI reference rate for USD/INR is ₹83.20, then:

Margin in INR = $32.55 × ₹83.20 = ₹2,708.76

This INR amount will be blocked in your trading account.

19.7  Calendar Spreads: Margin Benefits for Hedged Positions

Varun: Isha, I’m thinking of holding positions across two expiries. Can I reduce margin?

Isha: Yes! That’s a calendar spread. If you go long in November and short in December, the margin is reduced—₹1,500 for a 1-month spread.

Varun: That’s efficient. Does the benefit scale with duration?

Isha: Exactly. Longer spreads get slightly higher margin blocks, but still much lower than standalone positions.

A calendar spread involves taking offsetting positions in the same currency pair across two different expiry months. This strategy is commonly used to hedge directional exposure or to capture time-based price differentials.

How It Works

• You go long EUR/USD futures in November 2025
• You go short EUR/USD futures in December 2025

Since both positions offset each other, the exchange offers reduced margin requirements for the spread.

Exchange-Defined Spread Margins

Example: GBP/USD Calendar Spread

You buy GBP/USD November futures and sell GBP/USD January futures. This is a 2-month spread, so the margin blocked is ₹1,800, regardless of the individual contract values.

This margin benefit allows traders to deploy capital more efficiently while managing risk across multiple expiries.

19.8 Key Takeaways

• Cross-currency trading is now available on NSE, offering regulated access to global pairs like EUR/USD and GBP/USD.
• Each futures contract represents 1,000 units of the base currency, simplifying lot sizing and margin calculations.
• Tick sizes vary by pair, with 0.0001 for EUR/USD and GBP/USD, and 0.01 for USD/JPY.
• Profit and loss is initially calculated in the quote currency, then converted to INR using RBI reference rates.
• Options are European-style and quoted in the quote currency, with monthly and quarterly expiries.
• Final settlement prices are derived from RBI reference rates, using currency conversion formulas.
• Margins are blocked in INR, but calculated based on the quote currency and RBI rates.
• Trades before 2 PM use the previous day’s RBI rate, while trades after 2 PM use the current day’s rate.
• Calendar spreads offer margin benefits, allowing efficient capital deployment across expiries.
• Cross-currency derivatives bring global Forex trading within reach of Indian traders, with full transparency and local settlement.

19.9 Fun Activity

You’re given the following RBI reference rates:

• EUR/INR = ₹88.75
• USD/INR = ₹83.20

Question: What is the implied EUR/USD rate?

Answer: EUR/USD = ₹88.75 ÷ ₹83.20 = 1.0666

This reverse calculation helps traders understand how cross-currency settlement is derived.