The Bombay Stock Exchange will introduce new interest rate futures (IRF) contracts from December 30 on six-year government bonds maturing in 2022.
The IRF contract is based on 6.84 per cent central government security maturing on December 19, 2022, and will be available for trading from December 30, 2016.
An IRF contract is an agreement to buy or sell a debt instrument at a specified future date at a pre-determined price.
The cash-settled IRFs provide market participants an 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, foreign portfolio investors (FPIs) and other institutions.
Earlier, the National Stock Exchange (NSE) had announced that IRF contracts based on 6.84 per cent central government security having maturity on December 19, 2022, will be available for trading with effect from December 30, 2016.
