BSE to launch new IRF contracts on May 30

Leading bourse Bombay Stock Exchange (BSE) will introduce new interest rate futures (IRF) contracts on Monday, with the newly-launched government bonds maturing in 2030 as its underlying.

The IRF contract based on 7.61% central government security maturing on May 9, 2030, will be made available for trading from May 30 this year, the exchange said in a circular.

An IRF contract is an agreement to buy or sell a debt instrument at a specified future date at a pre-determined price.

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

The IRF market gets participation from retail investors, trading houses, foreign portfolio investors (FPIs) and other institutions.

The exchange last year had introduced IRF contracts with the newly-launched 6-year, 10-year and 13-year government bonds maturing in 2020, 2025 and 2030, respectively, as its underlying.