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NSE postpones interest rate futures trade
June 12, 2003 18:25 IST
The National Stock Exchange said it has postponed its proposed launch of trading in interest rate futures, earlier set for Friday.
"Members are requested to note that the date of introduction of interest rate futures which was scheduled for June 13 has been postponed. The date of introduction will be notified shortly," a notice on its website www.nseindia.com said on Thursday.
Officials said it was likely to kick-off next week but gave no further details.
Last week, the central bank allowed banks, primary dealers and term lenders to transact in interest rate derivatives on the country's stock exchanges and is expected to widen the derivatives market in the country.
The Reserve Bank of India said last Wednesday it will allow market participants to strike deals to hedge the interest rate risk of their government securities portfolio through exchange traded derivative products.
"Interest rate future contracts shall be based on the list of underlying (securities) as may be specified by the exchange and approved by the Securities and Exchange Board of India from time to time," a statement posted on the NSE's Web site said.
"To begin with, the underlying for the interest rate future contracts shall be notional 91-day treasury bills and notional 10-year government bonds," it said.
India currently allows trading in swaps benchmarked to overnight indexed funds rate and the implied rupee curve. Both of these products, which are over-the-counter, are popular with foreign and private banks along with primary dealers and corporates as hedging instruments.
To add depth
With short-selling curbed by the central bank, interest rate futures will help add depth to the government bond market which currently witnesses daily volumes of an average Rs 4,000-5,000 crore (Rs 40-50 billion), analysts said.
The central bank has said that market participants can become members of the futures and options segment of stock exchanges to undertake trading in interest rate futures, or transact through those who are members.
Traders said the interest rate futures contracts will be "marked to market" on a daily basis with the gain or loss exchanged on a cash basis.
The NSE said the minimum size of the interest rate derivative contract at the time of launch should not be lower than Rs 200,000.
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