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| NSE launches trading in interest rate futures |
| Press Trust of India / Mumbai Aug 31, 2009, 19:35 IST |
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The National Stock Exchange today launched Interest Rate Futures (IRF), a product that enables hedging against interest rate risks, that would help further deepen the country's financial markets.
Interest rate risk is the uncertainty in the movement of interest rates, which have never been constant in the past and presumably not remain constant in the future as well.
Banks, primary dealers, mutual funds, insurance companies, corporate houses, financial institutions and member-brokers will be eligible to participate in IRF trading -- available in futures contracts worth Rs two lakh each with a maximum maturity of 12 months.
IRF is the world's most widely-traded derivative tool. The interest rate futures contracts at NSE would be physically settled by delivery of deliverable-grade securities, the NSE said in its brochure on IRF.
"We want to see how to introduce more and more products on the exchange traded platform and settled through central clearing entity which gives settlement guarantee," Securities and Exchange Board of India Chairman C B Bhave said after the launch of the product.
Finance Secretary Ashok Chawla, who was also present on the occasion, said that banks and FIIs can also participate in interest rate futures within the regulatory framework.
The annualised volatility of yield of 10-year benchmark government of India Securities for the calendar year 2008 has been 17.40 per cent compared to 8.51 per cent in 2007.
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