Three national exchanges NSE, BSE and MCX-SX today got Sebi's approval to launch new interest rate futures in long tenure 10-year government bonds and these investment products would hit the market later this month.
Live trading in the new interest rate futures (IRF) will begin on NSE (National Stock Exchange) on January 21, while MCX-SX said it will also go live this month but did not give the exact date for the same.
While there was no official announcement from BSE in this regard, sources said it has also got Sebi's approval to launch IRF.
Earlier last month, the Securities and Exchange Board of India (Sebi) had permitted the stock exchanges to introduce cash settled IRFs on 10-year government bonds, which has been a long pending demand of capital market participants.
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 fluctuations in interest rates, which depend on various factors, including RBI policy, demand for liquidity and flow of overseas funds.
In a statement today, MCX-SX vice chairman Thomas Mathew said: "With the expected turnaround in the economy, there will be a growing need to bring to table the entire range of products for meeting investor needs. Development of the Interest Rate Derivatives (IRD) market is an important step in placing the Indian markets on par with developed economies".
"We will soon take this segment live," he added.
The product will benefit banks, brokerage houses, insurance companies and primary dealers, among others.
The market regulator had said IRF are being introduced on a pilot basis and the product features would be reviewed based on the experience gained.
To begin with, Sebi had said that serial monthly contracts with maximum maturity of three months would be available.
