Annexure 1 – Calendar Spread Functionality in BSE Currency Derivatives Segment

Please find below detailed trading rules on the Calendar Spread functionality in BSE Currency Derivatives
Segment -

1. Convention of Calendar Spread Orders in BSE Currency Derivatives Segment:-

Please note that the convention of Calendar Spread orders in BSE Currency Derivatives Segment is
opposite of that in BSE Equity Derivatives Segment.

A Buy spread order in BSE Currency Derivatives segment means Buy in Near Month leg and Sell in Far
Month leg.

A Sell spread order in BSE Currency Derivatives segment means Sell in Near Month leg and Buy in Far
Month leg.

The above convention is on par with the international market practices as well.

Illustration -
Buy spread order of 10 contracts in USDDECJAN14 contract will mean -
Buy 10 contracts in USDDEC13FUT and Sell 10 contracts in USDJAN14FUT.

Sell spread order of 10 contracts USDDECJAN14 contract will mean

Sell 10 contracts in USDDEC13FUT and Buy 10 contracts in USDJAN14FUT.

2. Nomenclature for spread contract:-

Asset_Near Month_Far Month_Far Month Year

Example - USDDECJAN14

Indicates a spread contract in USD INR currency pair with individual near month contract expiring on
DEC 2013 and far month contract expiring on JAN 2014.

3. Spread contracts availability:-

a. Spread contracts are available on all combinations of monthly future contracts.

b. Members can place orders in a calendar spread contract only till the time the constituent near
month leg of such spread contract is available for trading and has not expired, i.e. till 12:15 pm on
expiry day of the near month futures contract. Example – USDDECJAN14, USD DECFEB14 spread
contracts will be available for trading till USDDEC13FUT is available and has not expired i.e. till 12:15
pm on 27 December 2013

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c. Member suspension – Member shall not be allowed to place orders in calendar spread contracts if
he is suspended from trading in the Currency Derivatives segment.

d. Risk Reducing Mode (RRM) – Member shall not be allowed to place orders in calendar spread
contract if the member is in RRM in Currency Derivatives segment. However, the member can place
square up orders in individual monthly futures contracts in order to reduce his open position.

4. Contract Master for Calendar Spread contracts:-

Spread contracts are available in a separate spread contract master. The file name for the same is
BFX_SPD_CODDMMYY.csv. It is downloaded to members’ through Extranet in the common folder, along
with the regular contract master for monthly futures & options contracts. It is also available on the
following weblink – www.bseindia.com/boltpluslivesetup.aspx. File Format of the spread contract
master file is also available at the same weblink.

5. Type of Orders Allowed:-

Price Conditions - Only regular limit orders are allowed for calendar spreads. Market and Stop Loss
orders are not permitted.

Time Conditions – Day and IOC orders are permitted for calendar spreads.

6. Price Bands:-

In case of contracts with maturity less than 6 months - 10% of the underlying base price of currency (i.e.
Daily Settlement Price calculated on the basis of the last half an hour weighted average price in Rupee
term – RBI reference rate for that currency) will be calculated and thereafter 3% Dynamic Circuit Filter
will be imposed on the said calculated value as price bands.

In case of contracts with maturity more than 6 months - contracts, 10% of the underlying base price of
currency (i.e. Daily Settlement Price i.e. Calculated on the basis of the last half an hour weighted average
price in Rupee term – RBI reference rate for that currency) will be calculated and thereafter 5% Dynamic
Circuit Filter will be imposed on the said calculated value as price bands.

7. Matching Logic:-

Case 1 - An incoming spread order scans for the pending order in the spread order book for a potential
match. If the match is possible, the orders will match based on price time priority.

Example i): Following orders are available in the order book –

» Pending Order in USD DEC JAN14 Spread order book: BUY Qty 100@ Rs.0.2500

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» Incoming Order: SELL QTY 100 @ Rs.0.25
Rs.0.2500

able orders in the spread order book, a match will take place for Qty 100@
As there are two match-able
Rs.0.2500.

Example ii): Following orders are available in the order book –

» Pending Order in USD DEC JAN1JAN14 Spread order book: BUY Qty 100@ - Rs.0.5000

» Incoming Order: SELL QTY 100 @ - Rs.0.5000

able orders in the spread order book, a match will take place for Qty 100@ -
As there are two match-able
Rs.0.5000.

In both the above cases,, on execution, it shall rresult

esult into 2 trades, one each in the near and far month
futures contract constituting the spread contract.

Case 2 - Else, the order is further sent to the order books of the respective legs and other related spread
order books corresponding to individual legs to find a potential match.

This is illustrated below -

A. An incoming spread order in a contract can match with the orders present in the individual order
book of the near & far month contract

Incoming Order Buy USDDECJAN14

Passive Order Passive Order

Sell USDDEC13FUT Buy USDJAN14FUT

In the above illustration, on execution, it sshall

hall result into 2 trades, one each in the near and far month
futures contract constituting the spread contract.

Example i) – Assume that there are no pending orders in spread con

contract
tract order book USD DEC JAN 14

» At the same time, there are outstanding or

orders
ders available in the order book of individual leg
contracts as follows –

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 a) USD DEC 13 Futures Contract: SELL Qty 100 @ Rs
Rs.60.0000
b) USD JAN 14 Futures Contract
Contract: BUY Qty 100@ Rs.60.2500

» Incoming Order in USD DEC JAN 14 Spread Contract: BUY Qty 100 @ - Rs.0.2500

Here, the system will first try to scan through the order book of the spread contract. Since there are no
matchable orders available, the system will look for a potential match in individual legs of the spread i.e.
in order book of DEC 13 Futures an and
d JAN 14 Futures. Since the difference in prices between individual
leg buy and sell orders is also - Rs.0.
Rs.0.2500,
500, it will match with the incoming spread order resulting into 2
trades, one each in USD DEC 13 Futures Contract & USD JAN 14 Futures Contract.

B. An incoming spread order in a contract can match partly with a different spread order in another
contract and partly with the orders present in the individual order book of the near & far month
contract.

Incoming
oming Order Passive Order

Buy USDDECJAN14 Buy USDJANFEB14

Passive Order Passive Order

Sell USDDEC13FUT Buy USDJAN14FUT

In the above illustration, on executi

execution,
on, it shall result into 3 trades, one each in December 2013, January
2014 & February 2014 futures contracts.

Example –

Assume that there are no pending orders in spread contract order book USD DEC JAN 14.

At the same time, there are outstanding orders available in the order book of individual leg contracts as
follows –

1. USD DEC 13 Futures Contract: SELL Qty 100 @ Rs

Rs.60.5000
2. USD FEB 14 Futures Contract
Contract: BUY Qty 100@ Rs.60.0000
3. USD JAN FEB 14 Spread contract: BUY Qty 100 @ Rs
Rs.0.2500

Incoming Order in USD DEC JAN 14 Spread Contract

Contract: BUY Qty 100 @ Rs.0.2500

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Here, the system will first try to scan through the order book of the spread contract. Since there are no
matchable orders available, the system will look for a potential match in order book of DEC 13 Futures,
and order book of JANFEB14 spread. Also, since there is a matchable order in the order book of
JANFEB14 spread, the system will now additionally look for a potential match in order book of FEB 14
futures.

Thus the incoming spread order will result into 3 trades, one each in USD DEC 13 Futures Contract @
Rs.60.5000, USD JAN 14 Futures Contract @ Rs.60.2500 & USD FEB 14 Futures Contract @ Rs.60.0000.

8. Trade Notifications:-

For members/traders using BOLT Plus TWS and IML-based trading applications (developed by third party
vendors or in-house), trade notifications shall be provided on similar lines as that provided currently in
the Equity Derivatives segment.

Members/traders using ETI API-based trading applications, kindly refer to the ETI API document for
trade notifications.

It may be noted that the positions shall be created and the related margins shall be blocked on the basis
of trades in the individual monthly futures contracts.

9. Trade Management:-

a. Trade Modification – Client code modification is permitted on trades in the respective individual
futures instruments. However, client code modification is not allowed on the trade on the calendar
spread.

b. Online trade Give-up/Take-up process in Currency Derivatives segment – This is allowed on the
trades in the individual futures instruments but not allowed on the trade in the calendar spread.

*****End of Document*****

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