Leading stock exchange BSE today launched trade in interest futures and saw a turnover of over Rs 467 crore on debut.
BSE-IRF volume was Rs 467.86 crore with trading of 23,294 contracts, a BSE official told PTI here.
Other bourses NSE and MCX-SX, which had begun trading in IRF last week, had cloaked a turnover of Rs 3,081.49 crore and Rs 928.39 crore respectively on their debut.
Interest rate futures (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 would provide market participants with an option to hedge against risks arising from fluctuation in interest rates. Banks, FIIs, mutual funds, insurance companies, corporate houses, NBFCs and HNIs can trade on this.
"The launch of interest rate futures in its present form is an example of regulators, market participants, institutions working together to jointly develop meaningful products. With all institutions working together, we will be able to take markets to newer heights," capital market regulator Sebi's Chairman U K Sinha said after the launch.
In December 2013, Sebi had allowed stock exchanges to introduce cash-settled IRFs on 10-year government bonds.
Interest rate futures is a need of the business community to hedge their business products, he said, adding that globally 15-20 per cent of trading volume comes through IRF trading.
Stock exchanges and the trading community have to work together to keep the interest alive and volumes up, he said.
Futures can succeed if there is liquidity in the underlying market, Sinha said, adding, "We look forward to future development in the bond market and we expect more new products going forward."
The BSE has enabled trading in single security future products including, 7.16 per cent GoI maturing on 20th May 2023; 8.83 per cent GoI maturing on 25th November 2023, and calendar spread facility for trading across 3 contract months.
Ashishkumar Chauhan, MD & CEO of BSE said: "Globally, the market size of interest rate derivative contracts, such as IRFs is much larger than all other derivatives, including equities and commodities. This will certainly help investors in hedging their risks against the volatile currency markets along with wealth creation."
IRFs were launched twice earlier (in 2003 and 2009) but failed to pick up because of their complex structure.
The contracts are available in the new trading architecture of BSE trading system, called 'BOLT Plus', which is based on T7, the global trading architecture of Deutsche Bourse AG.
One of the key features of the new system is a response time of approximately 200 micro seconds making it the fastest trading platform in the country today, several times faster than the nearest competitor, Chauhan said.
