Exchange Traded Cash Settled Interest Rate Futures (IRF) on 6 year, 10 year and 13 year Government of India (GoI) Security
Summary
SEBI permits stock exchanges to introduce cash-settled Interest Rate Futures on 6-year and 13-year Government of India securities. The circular modifies existing norms for 10-year IRFs and mandates pre-launch approval proposals from exchanges and clearing corporations. Detailed product specifications, position limits, and risk management frameworks are outlined in Annexure 1.
Text
it has been decided to permit stock exchanges to introduce cash settled Interest Rate Futures on 6-Year and 13 year GoI Security.
Before the launch of the product/s, the Stock Exchange/Clearing Corporation shall submit proposal to SEBI for approval giving the details of contract specifications, risk management framework, the safeguards and the risk protection mechanisms, the surveillance systems etc.
The residual maturity of the underlying bonds as prescribed in the said circular stands modified (i.e. Para 1 of the Annexure 1) to ‘between 8 years and 11 years’ for both option A and B.
Stock Exchanges are now permitted to introduce three quarterly contracts of March/ June/ September/ December cycle in addition to three serial monthly contracts.
The mechanism specified in the said circular shall also be applicable on cash settled Interest Rate Futures on 6-Year and 13 year GoI Security.
Exchanges are permitted to launch contracts on either one or both of the following options: Option A: GoI security... Option B: Notional coupon bearing 6-year GoI security...
Exchanges are permitted to launch contracts on either one or both of the following options: Option A: GoI security... Option B: Notional coupon bearing 13-year GoI security...
Exchanges shall disclose the criteria for selection of the underlying bond/s in both options of cash settled Interest Rate Futures on 6 –Year Government of India security [and 13-Year].
9 a.m. to 5.00 p.m. on all working days from Monday to Friday. Exchanges shall align the trading hours of IRF with that of underlying market in case of change of trading hours of underlying NDS-OM platform.
Each futures contract shall represent 2,000 underlying bonds of total face value of INR 2,00,000/-.
Three serial monthly contracts followed by maximum three additional quarterly contracts of March/June/September/December cycle may be made available by Stock Exchanges.
The Daily Contract Settlement Value shall be = Pw*2000 (Here Pw is volume weighted average futures price of last half an hour).
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Source: SecMarx — Exchange Traded Cash Settled Interest Rate Futures (IRF) on 6 year, 10 year and 13 year Government of India (GoI) Security. Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.