NSE to launch interest rate futures on August 31

The National Stock Exchange (NSE) is all set to kickstart interest rate futures from August 31. The exchange had been conducting mock trading for the same for the past two weeks.

“We are ready with the necessary software and technology and have also received the go-ahead from the Securities and Exchange Board of India (Sebi). Interest rate futures would be launched on August 31,” said an NSE spokesperson.

With this launch, interest rate futures contracts would be available for trade in the currency derivatives segment (CDS) of NSE. Market timings for trading in the same would be from 9 a.m. to 5 p.m.

The Bombay Stock Exchange (BSE) and the Financial Technologies group-promoted MCX Stock Exchange (MCX SX) have also applied to Sebi for approval to launch interest rate futures.

When contacted, the two exchanges could not say with certainty when they would be able to launch interest rate futures. An MCX SX spokesperson, however, said that they would announce the date of launch as soon as the regulator cleared their proposal.

Currently, only currency futures are traded on MCX-SX. Besides approval for interest rate futures, the exchange has also been waiting for regulatory nod for equity trading.

In case of currency futures also, NSE was the first exchange to launch it in August last year.

While NSE will get the first-mover advantage in the interest rate futures segment, its decision to levy no transaction charge on trades up to the end of this calendar year would also stand the exchange in good stead. However, every trading member participating in the segment at any time during the above-mentioned period would be required to make a lump sum contribution of Rs 500 to the Investor Protection Fund.

Unlike in the currency derivatives segment, foreign institutional investors (FIIs) and non-resident Indians (NRIs) would be allowed to trade in interest rate futures. Apart from FIIs and NRIs, banks, corporate houses, retailers and high networth individuals too would be allowed to trade in the segment.

A joint technical committee of the Reserve Bank of India and Sebi had in June recommended allowing interest rate derivatives based on 10-year government bond yields.