Interest Rate Future debuts on NSE with trade worth Rs 3,000cr

Mirroring a strong response from investors, trading in interest rate futures (IRF) today kicked off on National Stock Exchange with trade worth over Rs 3,000 crore.
The IRF contract -- 'NSE Bond Futures' -- is cash settled and is based on the benchmark ten-year government bond, one of the most liquid debt paper instruments in the country.
The product at the NSE witnessed turnover worth Rs 3,081.49 crore with total traded volume of 1,51,134, as per data available with the exchange.
According to experts, the product is expected to become a sought after hedging tool in its latest avatar 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 NSE bond futures is based on the 10-year government bonds, with underlying 7.16 per cent and 8.83 per cent coupon rate.
Yesterday, the cash settled IRF in 10-year government bonds made a strong debut on MCX Stock Exchange with the new product witnessing trade worth Rs 928 crore. BSE will launch the product on January 28.
The cash-settled IRFs would provide market participants with a better option to hedge against risks arising from fluctuations in interest rates.

The product would benefit banks, brokerage houses, insurance companies and primary dealers, among others.
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.