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TMI BlogExchange Traded Cash Settled Interest Rate Futures (IRF) on 6 year, 10 year and 13 year Government of India (GoI) SecurityX X X X Extracts X X X X X X X X Extracts X X X X ..... feedback from market participants and Stock Exchanges, it has been decided to permit stock exchanges to introduce cash settled Interest Rate Futures on 6-Year and 13 year GoI Security. 3. The product specifications, position limits and risk management framework for both IRF products are given in Annexure 1. 4. Before the launch of the product/s, the Stock Exchange/Clearing Corporation shall submit proposal to SEBI for approval giving the details of contract specifications, risk management framework, the safeguards and the risk protection mechanisms, the surveillance systems etc. 5. 10-Year Cash Settled IRF : SEBI vide circular CIR/MRD/DRMNP/35/2013 dated December 05, 2013 while stipulating norms for cash settled 10-year IRF, inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... development of, and to regulate the securities market. 8. This circular is available on SEBI website at www.sebi.gov.in, under the category Circulars . Yours faithfully Maninder Cheema Deputy General Manager Division of Risk Management and New Products Market Regulation Department [email protected] Encl: as above Annexure 1: Cash Settled interest rate futures on 6 year and 13 year GoI security 1. Underlying a) 6 years : Exchanges are permitted to launch contracts on either one or both of the following options Option A : GoI security of face value INR 100 with semi-annual coupon and residual maturity between 4 years and 8 years on the day of expiry of IRF contract, as decided by stock exch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ket and determining their weights such as trading volumes in cash market, minimum outstanding etc. Exchanges shall disclose the criteria for selection of the underlying bond/s in both options of cash settled Interest Rate Futures on 13 Year Government of India security. 2. Coupon Option A : Coupon shall be same as that of the underlying bond. Option B : To be decided by the exchange to reflect the interest rate environment during the launch of the contract. 3. Trading Hours 9 a.m. to 5.00 p.m. on all working days from Monday to Friday. Exchanges shall align the trading hours of IRF with that of underlying market in case of change of trading hours of underlying NDS-OM platform. 4. Size of the Contract Each fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ext working day of the Expiry day. 11. Settlement Mechanism Settlement shall happen in cash in INR. 12. Final Contract Settlement Value The Final Contract Settlement Value shall be = 2000 * Pf where Pf is the final settlement price of the Underlying/Notional bond, which shall be determined as given below. Option A: Pf will be arrived at by calculating the volume weighted average price of the underlying bond based on the prices during the last two hours of the trading on NDS-OM. If less than 5 trades are executed in the underlying bond during the last two hours of trading, then FIMMDA price shall be used for final settlement. Option B: The final settlement price shall be based on average settlement yield (Y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not exceed its long position in the government securities and in Interest Rate Futures, at any point in time. The total gross long (bought) position in cash and IRF markets taken together for all FPIs shall not exceed the aggregate permissible limit for investment in government securities for FPIs. FPIs shall ensure compliance with the above limits. Stringent action shall be taken against FPI in case of violation of the limits. d) Clearing Member Level No separate position limit is prescribed at the level of clearing member. However, the clearing member shall ensure that his own trading position and the positions of each trading member clearing through him is within the limits specified above. e) Exchange Level Overall Positi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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