CIR/MRD/DRMNP/35/2013 December 05, 2013
Recognized Stock Exchanges
Recognized Clearing Corporations
Sub: Exchange Traded Cash Settled Interest Rate Futures (IRF) on 10-Year Government of India Security
1. SEBI vide circular No. SEBI/DNPD/Cir- 46 /2009 dated August 28, 2009 permitted Stock Exchanges to launch physically settled futures on 10-Year Government of India (GoI) Security.
2. In consultation with RBI, after taking into account feedback from market participants and Stock Exchanges, it has been decided to permit stock exchanges to introduce cash settled Interest Rate Futures on 10-Year Government of India Security.
3. The product specifications, position limits and risk management framework for cash settled futures on 10-year GoI security is given in Annexure-1. Two different designs (Option-A: Coupon bearing Government of India security as underlying and Option-B: Coupon bearing notional 10-year Government of India security with settlement price based on basket of Securities as underlying) are permitted for cash settled futures on 10-year GoI Security.
Exchanges are permitted to launch contracts on either one or both of these options.
4. The cash settled 10-year IRF is being introduced on a pilot basis and the product features would be reviewed based on the experience gained.
5. Before the launch of the product, the Stock Exchange/Clearing Corporation shall submit the 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.
6. This circular is issued in exercise of the powers conferred under Section 11 (1) of the Securities and Exchange Board of India Act 1992, read with Section 10 of the Securities Contracts (Regulation) Act, 1956 to protect the interests of investors in securities and to promote the development of, and to regulate the securities market.
7. This circular is available on SEBI website at www.sebi.gov.in., under the category Circulars.
Division of Risk Management and New Products
Market Regulation Department
Encl: as above