Interest rate futures (IRF) made its debut on the country’s oldest stock exchange BSE on Tuesday with a turnover of nearly Rs. 468 crore, signalling a strong investor response in the product.
BSE garnered a total of Rs. 467.86 crore with 23,294 traded volume contracts in IRFs, on its first day.
However, NSE and MCX-SX which had begun trading in IRF last week, had cloaked in a higher turnover of Rs. 3,081.49 crore and Rs. 928.39 crore respectively on their debut day.
The IRF contract is cash settled and is based on the benchmark 10-year government bond, one of the most liquid debt paper instruments in the country.
The BSE has enabled trading in single security future products, including, 7.16 per cent GoI maturing on May 20 2023, 8.83 per cent GoI maturing on November 25 2023, and calendar spread facility for trading across 3 contract months.
According to experts, the product is expected to become a popular hedging tool in its latest form after failing twice in the past.
IRFs were launched twice earlier (in 2003 and 2009) but failed to pick up because of their complex structure.
An 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 a better option to hedge against risks arising from fluctuations in interest rates.
Besides trading members, market participants like banks, FIIs, mutual funds, insurance companies, corporate houses, NBFCs, HNIs etc can trade on this product.
In December 2013, SEBI allowed the stock exchanges to introduce cash-settled IRFs on 10-year government bonds, a long-pending demand of market participants.