Abstract:
The purpose ofthis study is to provide a solution to bring stability in exchange rates for import
oriented countries like Pakistan itself, introduce financial instruments or precisely “Financial
Derivates” in the Pakistani market to protect producer/manufacturer from exchange losses,
increase investments in the country by introducing a derivative market in Pakistan where
derivative instruments like Futures can be traded to hedge losses using FIX protocols and
rewarding the economy with a healthy growth rate. Not only does it provide a solution for
business corporations to hedge their losses but provides a huge platform to the government as
well to increase their revenues. Government bodies such as the Pakistan Stock Exchange,
Securities and Exchange Commission of Pakistan, National Clearing Company Pakistan and
Central Depository Centre’s are involved in the transactions made, keeping their own
commission and tax charges empowering them to collect additional taxes and impose
regulation on such impactful trading market.
The Derivatives market such as Currency Carry Trade allows a leverage in trade against
credibility and credit rating as per relevant applicable policies and laws, it enables a trader to
sell and purchase commodities currencies and indexes weighing beyond what the balance sheet
support and enhances the profitability horizon, however, it works both ways and creates
equal probability for a loss to be booked beyond what the balance sheet oftrader/investor can
handle
