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Sunday, Dec 08, 2019

SEBI plans trading in interest rate futures

The Securities and Exchange Board of India says that it would take lesser time to introduce interest rate futures than it took for launching the currency futures.

business Updated: Sep 02, 2008 21:09 IST


The Securities and Exchange Board of India (SEBI) on Tuesday said it would take lesser time to introduce interest rate futures than it took for launching the currency futures.

“We think we can launch interest rate futures in lesser time than it took for introducing currency future,” SEBI Chairman CB Bhave said while interacting with the members of the Merchant Chamber of Commerce. The same RBI-SEBI technical committee that worked for currency future has began working on the new product.

SEBI introduced currency futures in August-end after the technical committee began working since March.

Taking a cue from Bhave’s comment, Indian capital market can expect to get rupee interest rate futures by December-January. “Currency future was the first cross regulatory product and now we hope to launch new products quicker,” he said. Cross regulatory products are those which involves two regulators. In this case, Reserve Bank of India and SEBI are the two regulators. Bhave, however, did not give any timeframe by when the technical committe will submit their report to the SEBI board.

Interest rate future is a standardised derivative product traded on an exchange to buy and sell and underlying asset (Rupee interest rate in this case) at a future date.

Asked about allowing FIIs and introducing “Options” in the currency futures, Bhave said there was a lot of demand but the regulator would like to gain experience before examining the possibility. There was a need for quicker launch of cross- regulatory products to provide benefit to the small companies and investors to get a hedge against risks, he added.

Giving rationale for introducing derivative products like currency futures and interest rate futures, Bhave said now investors are getting impacted by global events and there is need for tools to hedge the risks associated to global events.