The National Stock Exchange (NSE) which launched interest rate futures (IRF) on Monday, registered a trade volume of Rs 267.31 crore on Day 1, the NSE said in a statement in Mumbai.
Trading in interest rate futures was earlier inaugurated by Finance Secretary Ashok Chawla, in the presence of SEBI Chairman C B Bhave and RBI Deputy Governor, Shyamala Gopinath.
Interest rate futures on NSE are based on a notional ten year GOI bond, bearing a notional 7 per cent interest rate coupon payable half-yearly. The tradable lot size is Rs 2 lakh.
Market participants responded enthusiastically to the product launch on the first day. In around five hours of trading time available after inauguration, 1,475 trades were recorded resulting in 14,559 contracts being traded at a total value of Rs 267.31 crore, the NSE said.
Out of the two quarterly contracts available for trading, December 2009 was the most active with 13,789 contracts being traded. The bid-ask spread was observed to be around one tick i.e. quarter paisa most of the time, it said.
Nearly 638 members have registered for this new products out of which 21 are banks. The contribution by banks in the total gross volume was 32.48 per cent. Amongst banks, Union Bank of India was most active bank.
State Bank of India was the first PSU bank to trade, while Central Bank of India has executed the single largest trade.
In the domestic private bank category, HDFC Bank executed the first trade. Bank of America, IDBI Bank and Axis Bank also actively participated, the NSE said.
"After launching currency futures last year and interest rate futures today, we want to see how to introduce more and more products on the exchange traded platform and settled through central clearing entity which gives settlement gurantee," Securities and Exchange Board of India (SEBI) Chiarman, C B Bhave, said after the launch of interest rate futures in Mumbai.
Finance Secretary, Ashok Chawla, said that volumes were not the only thing. The manner in which the market develops is very important, he said.
Banks and FIIs can also participate in interest rate futures within the regulatory framework, Chawla said, adding that this is expected to give a push to this product.
Interest rate futures will be useful to those who have a view on the future interest rates and would like to benefit from interest rate movements. It is also expected to help those who have large a portfolio of GoI securities and would like to hedge against losses from interest rate movements, the NSE said.
Banks, primary dealers, mutual funds, insurance companies, corporate houses, financial institutions and member-brokers will be eligible to participate in IRF trading on the exchange.
The members registered with SEBI for trading in currency/equity derivatives segments are eligible to trade in interest rate derivatives, subject to the trading/clearing member having a net worth of Rs 1 crore and Rs 10 crore, respectively.
Interest rate futures are the most widely-traded derivatives instrument in the world and it also has a huge opportunity in India. Interest rate risk is the uncertainty in the movement of interest rates which have never been constant in the past and presumably not remain constant in the future as well.
The volatility of interest rates has increased manifold in the last couple of years. The annualised volatility of yield of 10-year benchmark Government of India Securities for the calender year 2008 has been 17.40 per cent compared to 8.51 per cent in 2007.
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