The MCX Stock Exchange will be the first to offer live trading in new interest rate futures (IRF) in 10-year government bonds, starting on January 20.
The exchange has received approval of the Securities and Exchange Board of India (SEBI) to introduce IRFs.
“The exchange shall launch cash-settled Interest Rate Futures (IRF) on 10-year government security in the currency derivatives segment with effect from January 20,” MCX-SX said in a circular today.
The National Stock Exchange (NSE) and the BSE will also start live trading in IRFs this month. While the NSE will launch IRFs on January 21, the BSE will commence trading for the product on January 28.
According to MCX-SX, members of the currency derivatives segment and their users can participate in IRF trading.
“Members of equity derivatives segment will also be eligible to participate after compliance of relevant membership norms being issued separately,” it added.
In December 2013, the SEBI allowed the stock exchanges to introduce cash-settled IRFs on 10-year government bonds, a long-pending demand of market participants.
An IRF is a contract between a buyer and a seller for future delivery of an interest-bearing security such as government bonds.
The cash-settled IRFs will provide market participants with a better option to hedge against risks arising from fluctuations in interest rates.
The product will benefit banks, brokerage houses, insurance companies and primary dealers, among others.
The SEBI had said IRF will be introduced on a pilot basis and the product’s features will be reviewed based on the experience gained. To begin with, the regulator had said that serial monthly contracts with a maximum maturity of three months would be available.