Financial Daily from THE HINDU group of publications
Thursday, Jun 12, 2003
Financial Daily from THE HINDU group of publications Thursday, Jun 12, 2003 |
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Money & Banking
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Derivatives Markets NSE interest rate futures trading from tomorrow Our Bureau
MUMBAI, June 11 THE much-awaited trading in interest rate futures is finally set to take off from Friday on the National Stock Exchange. In a notice to its members, NSE said the trading in interest rates futures on the exchange's futures and options segment would begin from June 13. Initially interest rate futures trading was scheduled to begin in April this year, but due to the various issues involved, the trading was postponed. The trading in interest rates follows the recommendation of the SEBI's sub-group on secondary market risk management committee. As per the recommendation, the existing derivative brokers are allowed to trade in the interest derivative market. Settlement of all interest rate futures contracts will be cash settled by debiting or crediting the clearing accounts of clearing members with respective clearing banks, the NSE notice said. Final settlement price for an interest rate futures contract will be based on the value of the notional bond determined using the zero coupon yield curve computed by NSE. As part of the risk-containment measures, NSE said initial margin shall be payable on all open positions of clearing members, up to client level, at any point of time, and shall be payable upfront by clearing members in accordance with the margin computation mechanism. Initial margin requirements shall be based on 99 per cent value at risk over a one-day time horizon. Other than the initial margin, clearing members shall be subject to exposure limits which will be 100 times the liquid net worth that is 1 per cent of the notional value of the gross open positions in notional 10-year bond futures (both coupon bearing and zero coupon) and shall be 1,000 times the liquid net worth that is 0.1 per cent of the gross open positions in notional 91-day T-Bill futures. Each trading member shall ensure that his clients do not exceed the specified position limit. The position limits shall be at the client level and for near month contracts and shall be 15 per cent of the open interest or Rs 100 crore, whichever is higher, the circular said.
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