BSE, NSE to launch new IRFs contract on July 31

Leading stock exchanges BSE and NSE will introduce new interest rate futures (IRFs) contract on July 31 with the newly launched 6-year and 13-year government bonds maturing in 2020 and 2030 as its underlying.

New Delhi: Leading stock exchanges BSE and NSE will introduce new interest rate futures (IRFs) contract on July 31 with the newly launched 6-year and 13-year government bonds maturing in 2020 and 2030 as its underlying.

IRF contract based on 8.27 percent central government security maturing on June 9, 2020, while another IRF contract based on 7.88 percent government bond maturing on March 19, 2030, will be made available for trading from July 31 this year, the exchanges said in separate circulars.

An IRF contract is "an agreement to buy or sell a debt instrument at a specified future date at a price that is fixed on Thursday."

The cash-settled IRFs provide market participants with the 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.

The IRF market gets participation from retail investors, trading houses, FIIs and other institutions.

The exchanges, in May, had introduced an IRF contract with the newly launched 10-year government bond maturing in 2025 as its underlying.

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