Sebi tweaks norms for interest rate futures

Changes have been made to enhance monitoring requirements and easing certification norms for employees of intermediaries

The Securities and Exchange Board of India (Sebi) has made changes to the interest rate futures (IRFs) regime, enhancing monitoring requirements and easing certification norms for employees of intermediaries, through two separate circulars issued on Monday.

The circulars come even as three exchanges sought to launch the IRF segment afresh in January. MCX Stock Exchange (MCX-SX) has already started its interest rate futures, with the National Stock Exchange (NSE) to launch operations on Tuesday, and the BSE on January 28.

The regulator has given brokerages two more years to ensure existing employees have the required interest rate derivative certification. New employees are to be given one year to comply.

“In view of the fresh launch of IRFs and difficulties expressed by the industry, it has been decided to extend the period for obtaining certification by such approved users and sales personnel for a period of two years from the date of this notification,” it said. The regulator had earlier given them two years through a circular in 2010.

The regulator has also sought to extend the depositories’ monitoring of foreign institutional investor (FII) positions to interest rate futures as well. Earlier depositories were only required to monitor the total FII investment values in government and corporate bonds.

“…(depositories) shall aggregate the gross long position of FIIs in IRF in each exchange and add it with investment of FIIs in government debt,” it said.  FIIs will not be allowed to add to their long position once it reaches a certain percentage of prescribed limits.

“Once 90 per cent of limit is utilised...stock exchanges shall notify the same to the market and thereafter FIIs shall not further increase their long position in IRF till the time the overall long position of FIIs in cash and IRF comes below 85% of existing permissible limit,” it said.

Meanwhile, IRF trades on MCX-SX clocked a turnover of about Rs 930 crore on the first day of trading through over 1,200 trades.

Andhra Bank, Axis Bank, Bank of Baroda, Bank of India, Canara Bank, Federal Bank, HDFC Bank, IDBI Bank, State Bank of India and Union Bank of India were among the participants, according to a statement from the exchange.