Securities and Exchange Board of India
CIRCULAR No. CIR/MRD/DRMNP/11/2015, Dated-June 12, 2015
Recognized Stock Exchanges Recognized Clearing Corporations
Exchange Traded Cash Settled Interest Rate Futures (IRF) on 6 year, 10 year and 13 year Government of India (GoI) Security
1. SEBI vide circular CIR/MRD/DRMNP/35/2013 dated December 05, 2013 permitted Stock Exchanges to launch cash settled Interest Rate Futures on 10- Year Government of India (GoI) Security.
2. In consultation with RBI, after taking into account feedback from market participants and Stock Exchanges, it has been decided to permit stock exchanges to introduce cash settled Interest Rate Futures on 6-Year and 13 year GoI Security.
3. The product specifications, position limits and risk management framework for both IRF products are given in Annexure 1.
4. Before the launch of the product/s, the Stock Exchange/Clearing Corporation shall submit proposal to SEBI for approval giving the details of contract specifications, risk management framework, the safeguards and the risk protection mechanisms, the surveillance systems etc.
5. 10-Year Cash Settled IRF: SEBI vide circular CIR/MRD/DRMNP/35/2013 dated December 05, 2013 while stipulating norms for cash settled 10-year IRF, inter alia, prescribed underlying bonds’ maturity criteria, position limits and maximum tenure for cash settled 10-year IRF.
The residual maturity of the underlying bonds as prescribed in the said circular stands modified (i.e. Para 1 of the Annexure 1) to ‘between 8 years and 11 years’ for both option A and B.
The position limits as prescribed in the said circular also stand modified as mentioned in Para ’13(a – e)’ of the Annexure 1 of this circular (i.e. Para ’13(a – e)’ of Annexure 1 of SEBI circular dated December 05, 2013 is replaced by Para ’13(a – e)’ of Annexure 1 of this circular).
In the said circular, for cash settled 10-year IRF, maximum three serial monthly contracts were permitted. In this regard, Stock Exchanges are now permitted to introduce three quarterly contracts of March/ June/ September/ December cycle in addition to three serial monthly contracts.
6. SEBI vide circular CIR/MRD/DRMNP/2/2014 dated January 20, 2014 prescribed monitoring mechanism for IRF positions of Foreign Portfolio Investors (FPIs). The mechanism specified in the said circular shall also be applicable on cash settled Interest Rate Futures on 6-Year and 13 year GoI Security.
7. This circular is issued in exercise of the powers conferred under Section 11 (1) of the Securities and Exchange Board of India Act 1992, read with Section 10 of the Securities Contracts (Regulation) Act, 1956 to protect the interests of investors in securities and to promote the development of, and to regulate the securities market.
8. This circular is available on SEBI website at www.sebi.gov.in, under the category “Circulars”.
Man inder Cheema
Deputy General Manager
Division of Risk Management and New Products
Market Regulation Department
Encl: as above