The Bombay Stock Exchange today said that live trading in interest rate futures (IRF), in long tenure 10-year government bonds, will begin on its platform on January 20.

The exchange has already received the approval from the Securities and Exchange Board of India for launching IRFs.

“We will launch IRF trading on January 20 of this year,” BSE MD and CEO Ashishkumar Chauhan told reporters here at a function organised by the Association of National Exchange Members of India (ANMI).

Besides, NSE will begin live trading in IRF on January 21, while MCX-SX said it will also go live this month without giving an exact date.

Earlier last month, the market regulator had permitted the stock exchanges to introduce cash-settled IRFs on 10-year government bonds, which has been a long pending demand of the capital market participants.

Interest rate futures

An IRF is generally a contract between a buyer and a seller agreeing to the future delivery of any interest-bearing asset such as government bonds.

The cash-settled IRFs will provide market participants with better option to hedge risks arising from fluctuation in interest rates, which depend on various factors, including RBI policy, demand for liquidity and flow of overseas funds.

The product would benefit banks, brokerage houses, insurance companies and primary dealers, among others.

The market regulator had said that IRFs are being introduced on a pilot basis and the product features would be reviewed based on the experience gained. To begin with, it had said that serial monthly contracts with a maximum maturity of three months would be available.

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