JAKARTA, Sept 18 (Reuters) - Indonesia's central bank on Thursday introduced a set of rules for foreign exchange trading in a bid to encourage more derivative trading and deepen the market.
Four new regulations issued on Thursday included changes in the rules for forward or option FX transactions. From now on, all customers doing a transaction above $1 million must provide underlying documentation. Until now, they have only had to provide such a document to roll over a transaction.
Bank Indonesia also is now allowing traders to terminate their futures FX transactions early or unwind the future buying or selling of foreign exchange and to settle the transaction by netting. Previously, this has not been permitted.
"(Deepening the FX market) is one of the weapons that we use to prepare ourselves for the possibility of Fed fund rate hike and the new government's plan for a fuel price hike," Tirta Segara, Bank Indonesia spokesman, said at press briefing ahead of Thursday's release of the rules.
Bank Indonesia especially wants to deepen futures trading, he added.
Spot trading of the rupiah currently dominates Indonesia's foreign exchange market, and the volume from all trading is much lower than in other countries in the region. (Reporting by Gayatri Suroyo and Adriana Nina Kusuma; Editing by Richard Borsuk)