MCX-SX begins IRF trade; product witness trade worth Rs 928-cr

The cash settled interest rate futures (IRF) in 10-year government bonds today made a strong debut on MCX Stock Exchange with the new product witnessing trade worth a little over Rs 928 crore.
The product witnessed turnover of Rs 928.39 crore on the exchange, with total traded volume at 45,642. At the end of trading day, the Open Interest position stood at 10,690, MCX-SX said in a statement.
An IRF is a contract between a buyer and a seller for future delivery of an interest-bearing security such as government bonds.
Also, the National Stock Exchange will start trading IRF contracts from tomorrow, while BSE Ltd will start trading them from January 28.

Among the banks that traded on the first day included 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.
"There has been a demand by market players for cash- settled IRF products. The decision of the regulators to introduce cash-settled IRF will go a long way in widening and deepening the Interest Rate Derivatives market," MCX-SX Vice Chairman Thomas Mathew T said.

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.