Interest Rate Futures trading gains momentum; turnover up

Gaining popularity in the Indian markets, trading in Interest Rate Futures on on top bourses -- BSE and NSE -- has seen a robust uptick in turnover with trades worth Rs 21,851 crore being recorded in May this year.
Trading value of Interest Rate Futures (IRF) rose by 16.7 per cent last month, from Rs 18,720 crore in April 2014, data with the two exchanges showed.
The product was launched on the two exchanges in middle of January 2014. Their turnover recorded the highest monthly levels in May.
The BSE recorded a IRF trading value of Rs 1,380 crore in May as against Rs 1,117 crore in April.

Besides, NSE trading value in the product stood at Rs 20,471 crore in May, a rise of 16.3 per cent compared to the preceding month. The exchange is much above BSE both in terms of trading value and volume in IRF.
Moreover, the total tally for IRF in the first two months (April and May) of the current fiscal amounted to Rs 40,571 crore. This is higher than Rs 32,753 crore worth of trading logged in the fiscal year 2013-14, during which IRF was traded for about 3 months beginning mid-January till end March.

The combined trading value in IRF stood at Rs 9,917 crore in January, Rs 10,290 in February and Rs 12,544 crore in March.

Bourses cumulatively traded 10.86 lakh contracts on their platforms during May, a 15 per cent rise over April.
The NSE and the BSE had traded 10 lakh contracts and 68,469 IRF contracts on their respective segments.
An IRF is generally a contract between a buyer and a seller agreeing to the future delivery of any interest-bearing asset such as government bonds.
The cash-settled IRFs provides market participants with a better option to hedge risks arising from fluctuations in interest rates, which depend on various factors including RBI policy, demand for liquidity and flow of overseas funds.
Banks, primary dealers, mutual funds, insurance companies, FIIs, corporates and brokers, as well as retail investors can trade in this product.